Fixed vs variable home loan: how to choose in 2026-27
A fixed rate gives certainty; a variable rate gives flexibility. Here is how they compare and what to weigh up.
One of the first choices on a home loan is whether to fix your interest rate or leave it variable. Neither is universally better — they trade certainty against flexibility, and the right pick depends on your situation and how you plan to use the loan.
Variable rate
A variable rate moves up and down with the market. The upside is flexibility: variable loans usually come with an offset account, free redraw, unlimited extra repayments, and the freedom to refinance without break costs. The downside is uncertainty — if rates rise, so do your repayments.
Fixed rate
A fixed rate locks your interest rate for a set term, usually one to five years. The upside is certainty — your repayments will not move for the fixed period, which helps budgeting. The trade-offs: fixed loans often limit or block extra repayments, may not offer an offset, and can charge break costs if you exit or refinance early.
Split loans
You do not always have to choose one. A split loan fixes part of the balance and leaves the rest variable — some certainty, some flexibility.
Worked example
Olivia wants to attack her mortgage with big extra repayments and keep savings in an offset. A variable loan suits her, because a fixed loan would cap her extra repayments and likely lack an offset. Her neighbour Tom, on a tight fixed budget who values predictable repayments above all, leans the other way and fixes for certainty.
Model your mortgage payoff
See how extra repayments and an offset change your payoff time — best used with a flexible variable loan.
This is general information, not personal advice. Rates, features and break costs vary by lender — check your loan's terms. See also offset vs redraw vs extra repayments.
Frequently asked questions
Is a fixed or variable home loan better?
Neither is universally better. Fixed gives repayment certainty; variable gives flexibility and features like offset and free extra repayments. It depends on whether you value certainty or flexibility more.
Can I make extra repayments on a fixed loan?
Often only up to a limit, and some fixed loans block them entirely. If paying your loan down fast matters, a variable loan is usually the better fit.
What are break costs?
If you exit or refinance a fixed loan early, the lender may charge a break cost to recover its loss when rates have moved. Variable loans generally do not have these.
What is a split loan?
A split loan fixes part of your balance and leaves the rest variable, giving you some repayment certainty while keeping flexibility and offset benefits on the variable portion.