Fixed or variable home loan

Should I apply for a fixed or variable interest rate home loan?

Rates and Fees verified correct on December 7th, 2016

Find out which interest rate type suits you so you save the most.

Choosing between a fixed or variable rate home loan boils down to your financial situation and how likely your life or financial situation will change. If you're not sure what types of changes in your life or home are around the corner, a variable rate home loan is usually a good idea simply because they are more flexible and have lower fees.

If you need to refinance or repay your loan too while on a fixed rate loan, you are liable for an early repayment cost, which can add up to tens of thousands of dollars.

More about Fixed or Variable interest rate home loan

Things to think about

Before you make any decision regarding a fixed or variable home loan, always look closely at your current financial situation and your future goals. Be honest about your need for repayment certainty and security and work out whether you're likely to sell your home in the near future. These things will help you make a more informed decision about which option is likely to suit your needs best.

things to think about when it comes to fixed or variable
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Fixed or variable with Carla Baldock | RAMS head of products

Carla discusses some considerations when choosing between Fixed or a Variable rate loan

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Fixed rate home loans

What is a fixed interest rate home loan?

A fixed rate home loan is a mortgage that has an interest that is fixed for a number of years. At the end of the fixed interest period, the loan will either revert to a variable interest rate or the borrower can choose a new fixed interest period. Fixed loan periods are from one to five years.

Rates last updated December 7th, 2016
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.75% 4.87% $0 $395 p.a. 95% Go to site More info
ANZ Breakfree Package Home Loan - 2 Year Fixed (Owner Occupier) $150k+
This 2 year fixed ANZ Breakfree Package rate comes with package discount and product bundle. Terms and conditions, package fee and fees, charges & eligibility criteria apply.
3.75% 4.62% $0 $395 p.a. 95% Go to site More info
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier)
An online home loan offer with a fixed interest offer for 3 years.
3.69% 4.00% $395 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.42% $0 $375 p.a. 85% Go to site More info
Bank Australia Premium Home Loan Package - 2 Year Fixed (Owner Occupier) LVR < 80%
Buy a new home even if you haven't yet sold your existing one with the bankmecu Bridging Loan
3.69% 4.24% $0 $350 p.a. 95% Go to site More info
CUA Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed home loan with no ongoing fees and flexible repayments options.
3.69% 4.56% $600 $0 p.a. 95% Go to site More info
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier)
A one year fixed rate offer with no ongoing bank fees.
3.69% 4.15% $395 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed ($150K+ Owner Occupier)
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.74% 4.40% $0 $375 p.a. 85% Go to site More info
IMB Platinum Package Fixed Home Loan - 3 Year Fixed (LVR < 90% Owner Occupier)
3 years fixed platinum package with a low interest rate and $0 application fee.
3.75% 4.62% $0 $395 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Owner Occupier)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your home value.
3.99% 4.81% $0 $0 p.a. 95% Go to site More info
ME Bank Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.84% 4.66% $0 $0 p.a. 95% Go to site More info
Switzer Fixed Rate Home Loans - 2 Years Fixed Rate
A competitive 2 year fixed rate with your very own lending service manager.
3.97% 3.99% $0 $0 p.a. 80% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier)
Get a short term fixed rate for that investment property with no application or ongoing fees.
3.99% 4.90% $0 $0 p.a. 95% Go to site More info
3.94% 4.33% $0 $395 p.a. 90% Go to site More info
Switzer Fixed Rate Home Loans - 3 Years Fixed Rate
Fix this competitive rate for 3 years and pay no monthly or annual fees.
4.12% 4.02% $0 $0 p.a. 80% Go to site More info
ME Bank Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier)
No application or ongoing fees and a competitive 2 year fixed rate.
3.84% 4.75% $0 $0 p.a. 95% Go to site More info
UBank UHomeLoan - 5 Year Fixed Rate (Owner Occupier)
A five year fixed rate offer with no ongoing bank fees.
4.27% 4.18% $395 $0 p.a. 80% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Years Fixed (Owner Occupier)
Split your loan for free with one of the lowest fixed home loan rates.
3.99% 4.73% $0 $0 p.a. 95% Go to site More info
NAB Choice Package Home Loan - 5 Year Fixed (Owner Occupier)
A competitive loan with flexible features. 250,000 Velocity Frequent Flyer point offer, conditions apply.
4.59% 5.02% $0 $395 p.a. 95% Go to site More info
ANZ Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
Lock in your rate for 2 years with an interest only option.
3.90% 5.06% $600 $10 monthly ($120 p.a.) 95% More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier)
Fee free extra repayments available during the fixed term. $1,250 cash back offer for refinancers. Conditions apply.
3.99% 5.00% $0 $395 p.a. 95% More info
Suncorp Home Package Plus Fixed - 3 Year Fixed Rate (Special Offer $150k+ LVR <=90% Owner Occupier)
Lock in a special offer rate for 3 years for loans over $150k with LVR below 90%.
3.64% 4.26% $0 $375 p.a. 90% More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cash back available for refinancers, conditions apply.
3.99% 5.07% $0 $395 p.a. 95% More info
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years
A low interest rate home loan and competitive two year fixed rate.
3.99% 4.97% $0 $395 p.a. 95% More info

Benefits of fixed rate home loans

  • Fixing: One of the biggest benefits to choosing a fixed rate home loan is the certainty that your rates cannot increase during that fixed term. If it's likely the variable rates are going to increase, this lets you avoid being stung by those rate hikes for the length of the fixed period.
  • Budgeting: This makes it much easier to budget, as payments will stay the same until that fixed rate ends.

Problems with fixed rate home loans

  • Inflexibility: Traditionally fixed rate home loans have been associated with being very inflexible. Many banks place limitations on the number of additional repayments you're able to make during the fixed term before penalties apply. Other restrictions may also include not having access to a redraw facility during the fixed term and not being able to link a 100% offset account to the loan to help reduce interest costs.
  • Break costs: You may also find that breaking out of a fixed rate loan before the end of the fixed term may incur hefty break costs. This tends to occur if you sell your home or refinance over to another lender during the fixed rate term.

More details on fixed loans

Changes to the flexibility of fixed home loans

More recently, some fixed loans have been found offering the ability to repay above the minimum repayments to a certain limit (often around $20,000 over the fixed period) and allow redraw of those excess payments.

How long are fixed loan terms?

Most banks allow you to choose fixed rate terms that extend from one year up to five years as standard products. Some banks may even give you a custom option for 6-10 years of fixed interest.

Why shouldn't I fix my home loan?

If you see a fixed interest rate advertised for a three year fixed term, but you know you're likely to sell, renovate or refinance your home within that time, you may want to consider alternative options.

There's also the downside of being stuck paying a higher interest rate if variable rates start to fall. If your fixed term still has a couple of years to run and variable rates drop, you'll miss out on interest rate savings.

Why should I fix my home loan?

When interest rates are at historic lows, borrowers can choose to lock in the low rates. However, predicting the bottom of the interest rate cycle is a challenge that can best even the most brilliant financial minds.

About fixed rate home loans here

Pros and cons of fixed rate home loan

Pros

  • Repayments can't rise during the fixed term
  • Great for security
  • Helps borrowers budget into the future

Cons

  • Interest rates won't drop in line with official interest rates
  • Extra payments are either limited or not allowed at all
  • Penalties apply for paying more than the approved extra repayment limits
  • Large exit fees may apply if you break out of your loan before the end of the fixed term
  • Lower flexibility with loan terms and features
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Variable rate home loans

What is a variable interest rate home loan?

A variable home loan has an interest rate that can rise or fall broadly in line with official interest rates. They are the cheapest for fees and are far more flexible than their fixed counterparts.

These are the most common forms of home loans in Australia. ABS figures for February 2013 reveal that variable rate home loans make up 86.5% of all mortgages. The remaining 13.5% are fixed rate home loans.

Rates last updated December 7th, 2016
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.55% 3.57% $0 $0 p.a. 90% Go to site More info
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
loans.com.au Essentials - New Purchases Only Up to 80% LVR (Owner Occupier, P&I)
Low variable rate for new purchases as well as no application or ongoing fees. Special offer ends 15 December.
3.39% 3.41% $0 $0 p.a. 80% Go to site More info
State Custodians Standard Variable Spring Special - LVR 80% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.59% 3.92% $0 $299 p.a. 80% Go to site More info
ClickLoans The Online Home Loan - Owner Occupier ≤ 80% LVR
Enjoy a competitive interest rate when you have a deposit of at least 20%.
3.69% 3.69% $0 $0 p.a. 80% Go to site More info
CUA Kick Start Variable Home Loan - 2 Years Introductory (Owner Occupier)
Borrow up to 90% LVR and enjoy an introductory rate for the first 2 years.
3.69% 3.87% $600 $0 p.a. 90% Go to site More info
loans.com.au Offset Variable - New Purchases Only Up to 80% LVR (Owner Occupier, P&I)
No application or annual fees, and access to a 100% offset account. Special offer ends 15 December.
3.49% 3.51% $0 $0 p.a. 80% Go to site More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive rate with redraw facility. NSW, QLD and ACT residents only.
3.89% 3.89% $0 $0 p.a. 85% Go to site More info
loans.com.au Essentials - Variable Refinancers Only (Owner Occupier, P&I)
A low-interest rate loan suited for refinancing with no application or ongoing fees.
3.59% 3.61% $0 $0 p.a. 80% Go to site More info
State Custodians Standard Variable Spring Special - LVR 90% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.69% 4.02% $0 $299 p.a. 90% Go to site More info
Australian Unity Kick Starter Home Loan
$0 ongoing service fees, maximum 80% LVR and a linked transaction account.
3.79% 3.82% $600 $0 p.a. 80% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.74% 4.12% $0 $395 p.a. 95% Go to site More info
Switzer Home Loan
No upfront or ongoing fees and a competitive variable rate for owner occupiers.
3.89% 3.89% $0 $0 p.a. 90% Go to site More info
Greater Bank Ultimate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A discounted rate with 100% offset account. NSW, QLD and ACT residents only.
3.89% 4.27% $0 $375 p.a. 85% Go to site More info
IMB Accelerator Home Loan  - LVR <=80% $300k+ (Owner Occupier)
A two year discounted rate which reverts to an ongoing life of loan discount afterwards.
3.64% 4.39% $445 $0 p.a. 80% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
A competitive variable that allows borrowers to borrow from a minimum of $100,000 and $0 ongoing fee.
3.59% 3.60% $0 $0 p.a. 80% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
A competitive budget rate without any unwanted bells and whistles.
3.87% 3.92% $445 $0 p.a. 90% Go to site More info
AMP Essential Home Loan  -  Owner Occupier
Take advantage of a redraw facility, competitive variable rate and no application or settlement fees for a limited time.
3.98% 4.00% $350 $0 p.a. 90% Go to site More info
Beyond Bank Low Rate Special Home Loan
A special low variable rate for Owner Occupier with 100% offset account and no application or ongoing fees.
3.73% 3.73% $0 $0 p.a. 70% Go to site More info
Bank Australia Premium Home Loan Package - LVR<=80% $700k + (Owner Occupier)
Enjoy the discounted interest rate with redraw facility and no ongoing fees.
3.74% 4.09% $0 $350 p.a. 95% Go to site More info
ME Bank Basic Home Loan - LVR <=80% Owner Occupier
A low variable rate loan with no application or ongoing fees.
3.99% 4.01% $0 $0 p.a. 80% Go to site More info
Australian Unity Health, Wealth and Happiness Package - (Owner Occupier)
Get a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.99% 4.02% $600 $0 p.a. 90% Go to site More info
ClickLoans The Online Investor Home Loan - LVR <70%
An investment home loan with competitive rate and 100% offset account.
3.79% 3.79% $0 $0 p.a. 70% Go to site More info
IMB Essential Home Loan - LVR < 80% (Owner Occupier)
Get a discount on your rate and flexible repayment options with this loan.
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan with no application fees for a limited time. 250,000 Velocity Frequent Flyer point offer, conditions apply.
4.10% 4.14% $0 $0 p.a. 95% Go to site More info
4.47% 4.84% $0 $395 p.a. 80% Go to site More info
Westpac Flexi First Option Home Loan - 3 Years Introductory Special Offer (New Owner Occupier, P&I)
A limited time deal for new owner occupiers. Advertised rate includes 1.03%p.a. discount for the first two years.
3.99% 4.37% $0 $0 p.a. 95% More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
4.08% 4.09% $0 $0 p.a. 95% More info

Benefits of variable rate home loans

  • Flexibility & features. Many standard variable home loans,particularly online home loans come with a host of features these days. These features allow a greater ability to pay off a mortgage faster while slashing interest, or conversely, borrow more, redraw on extra repayments or draw down on equity.
    These features allow borrowers a wider scope to use a home loan towards their specific goals.Most variable loans will allow you to make free-free additional payments at any time, with no maximum limit. You should also find that you have access to a redraw facility and more flexible repayment options.100% offset accounts, which can save tens of thousands in interest over the life of the loan and also cut years off a mortgage, are only available on variable home loans. This is a great, hands-off feature, as it saves you interest without the need to make additional repayments. It really takes care of itself as long as you keep a positive balance.
  • Ease to refinance. It is cheapest to refinance from a variable rate home loan. So if you have an eye for a bargain, getting a variable rate home loan is the best way to be able to switch to lenders as cheaper interest rates become available.Remember, refinancing includes selling your home, borrowing more and renovating — not just switching to a cheaper rate. So, if you are thinking of doing any of these things in the near future, it is worth considering a variable rate home loan.
  • Falling interest rates. Only variable interest home loans position borrowers to benefit from falling interest rates — which are usually passed on directly to variable rate customers.While interest rates are low, choosing a variable rate home loan isn't such a tough decision.
  • Low fees. Basic variable home loans are cheaper in fees than basic fixed interest home loans. This is because there is usually a fee charged to fix an interest rate.

Problems with variable rate home loans

  • interest can rise. Interest rates run in cycles. As rates start to rise again, banks pass on those increases to you. This can increase your monthly repayments and make it more difficult for some families to keep up.

About variable rate loans here

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Pros and cons of variable rate home loan

Pros

  • Very flexible loan features
  • Make any number of additional payments without penalty
  • Access extra funds via the redraw facility
  • Easier and cheaper to switch to another loan
  • Typically lower fees

Cons

  • Repayments can fluctuate as rates rise and fall
  • Difficult to predict future interest rate movements
  • Harder to budget when rates are in a rising trend

Split home loans

What is a split rate home loan?

A split rate home loan is a total loan amount divided into two custom portions; one locked into a fixed rate and the other variable.

If you really like the idea of fixing your interest rate, but you don't want to lose the flexible features available on your variable loan, you can choose to split your home loan.

Rates last updated December 7th, 2016
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.55% 3.57% $0 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Owner Occupier)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your home value.
3.99% 4.81% $0 $0 p.a. 95% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.75% 4.87% $0 $395 p.a. 95% Go to site More info
NAB Choice Package Variable Rate - $250k to $749,999 P&I (Owner Occupier)
A great variable package from NAB which includes offset and redraw features. No application fee.
4.40% 4.79% $0 $395 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier)
Get a short term fixed rate for that investment property with no application or ongoing fees.
3.99% 4.90% $0 $0 p.a. 95% Go to site More info

Benefits of a split rate home loan

  • Flexibility and security: Split rates let borrowers take advantage of the best aspects of both loan types. A fixed component is locked in for the next few years, so borrowers have the confidence of known repayments on that portion. A variable component gives borrowers access to many of the flexible features and additions they want — notably extra repayments and redraw.

Problems with split rate home loans

  • Break costs: A part of a split rate loan is made up of a fixed rate component, so the same steep costs apply if the loan is paid out early, which make refinancing during the fixed period very costly.
  • Fees: It will usually cost a couple of hundred dollars to set up the fixed rate portion of a split rate home loan — over and above what it would cost to establish a basic variable home loan.
Back to topAbout split loans


Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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HSBC Home Value Loan - Resident Owner Occupier only

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2 Responses to Should I apply for a fixed or variable interest rate home loan?

  1. Default Gravatar
    Cath | November 25, 2015

    If we sell our house after 5 years and our loan is variable over 25 years do we have to pay the whole interest owing for total of 25 years or does the bank work out interest owing for 5 years and penalty fees?

    • Staff
      Jodie | November 25, 2015

      Hi Cath,

      Thank you for reaching out to finder.com.au a financial comparison website.

      If you have been repaying your loan with principal and interest repayments you will only be repaying the remaining principal and interest amount that you owe to the lender, they will not also work out how much interest you would have repaid during the life of your loan.

      You may be able to ask your lender for a payout amount for a specific date to give you an idea of how much you will repay.

      Regards
      Jodie

      Regards
      Jodie

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