Fixed vs Variable Home Loans: Frequently Asked Questions
Choosing between a fixed and variable home loan is one of the most common — and most important — questions borrowers face.
Below are the key questions we’re asked, answered clearly to help you decide what suits your situation best.
What is the difference between a fixed and a variable home loan?
A fixed rate home loan locks in your interest rate for a set period, usually between 1 and 5 years.
A variable rate loan has an interest rate that can change over time, meaning repayments may increase or decrease as rates move.
Is a fixed or variable loan better?
There’s no universal “better” option.
The right choice depends on your cash flow, risk tolerance, and how much flexibility you want. Fixed loans offer certainty, while variable loans offer flexibility.
Why would someone choose a fixed rate loan?
People often choose fixed loans because they want predictable repayments and protection from interest rate rises.
They can work well during periods of rising rates or when cash flow needs to remain stable.
What are the main downsides of fixed rate loans?
Fixed loans usually come with less flexibility.
Extra repayments may be limited, offset accounts may be restricted, and break costs can apply if you exit the loan early.
Why would someone choose a variable rate loan?
Variable loans are popular with borrowers who want flexibility.
They usually allow unlimited extra repayments, full offset accounts, and easier refinancing.
They also allow you to benefit automatically if interest rates fall.
What are the risks of a variable loan?
The main risk is repayment increases if interest rates rise.
This can put pressure on cash flow if the loan isn’t structured conservatively.
Can I make extra repayments on a fixed loan?
Usually yes — but they’re often capped.
Any repayments above the limit may attract fees, so it’s important to understand the terms before committing.
Can I refinance a fixed loan?
Yes, but break costs may apply.
Break costs depend on how much time is left on the fixed term and how interest rates have moved since you fixed the loan.
What happens when a fixed rate period ends?
When the fixed period ends, the loan usually reverts to the lender’s standard variable rate unless action is taken.
This is often a good time to review your loan and consider your options.
What is a split loan?
A split loan combines both fixed and variable components.
This allows you to lock in part of your loan for certainty while keeping part flexible.
Are split loans a good idea?
They can be.
Split loans are often used to balance risk and flexibility, particularly when borrowers want some protection from rate rises without giving up full access to offset accounts.
Should I choose based on today’s interest rate?
No.
Choosing based solely on the current rate often leads to regret later.
It’s more important to consider how the loan will perform over time and how it fits your lifestyle and plans.
How does a broker help with this decision?
A broker helps you understand how each option behaves in different scenarios and how lender policies differ.
They can also structure loans — including splits — to suit your goals, not just today’s market.
Not Sure Which Option Is Right for You?
If you’re unsure whether fixed, variable, or a combination makes sense, a conversation can help clarify the best approach for your situation.
The right choice is the one that supports your plans — not just today’s rate.
