Fixed or Variable Home Loan

Fixed or variable home loans – it's a question of certainty versus flexibility.

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Australian mortgages can have either fixed or variable interest rates. Variable interest rates can change at any time (up or down) and tend to offer lower rates and more flexibility. Fixed interest rates cannot go up (or down) for the fixed period (usually 1-5 years) but have less flexibility. When the fixed period ends the loan reverts to a variable rate.

Read on to find out more about the differences between fixed and variable rates.

Fixed and variable – fast facts

  • The lowest variable rate available on Finder right now is 2.79%.
  • The lowest fixed rate available on Finder right now is 2.69%.
  • Fixed rate mortgages only make up around 20-25% of all mortgages (source).

Variable versus fixed interest rates: what's the difference?

Both variable and fixed rates have strengths and weaknesses and it all depends on your needs as a borrower. It's usually a trade-off between flexibility on the one hand and certainty on the other.

Fixed ratesVariable rates
  • No change. Your interest rate won't change at all during the fixed period.
  • Changes. Your lender can change your interest rate at any time (up or down).
  • Less to worry about. You can "set and forget" your rate and never have to worry about it changing during the fixed period.
  • Watch your rate. You need to keep an eye on your interest rate and consider switching if it gets too high.
  • Higher fees. Fixed rate loans often have higher exit fees.
  • Lower fees. Competitive variable loans often come with lower fees than their fixed rate equivalents.
  • Refinancing. It's often harder to refinance to another loan during the fixed rate period because of fixed loan break costs.
  • Refinancing. It's easier to refinance a variable rate mortgage.
  • Fewer features. Fixed rate loans are less likely to have offset accounts or redraw facilities.
  • But you don't always need these features.
  • But do you need them? These features can come with a higher rate, so if you don't use them they're not really worth it.
  • Limited extra repayments. Some fixed loans allow extra repayments but these are often limited to a certain amount per year.
  • More flexible. Many variable rate loans come with flexible repayment options and don't charge you for making extra repayments. This lets you repay your mortgage faster.

Which rate type is right for you?

The real question is what do you want from your home loan. This helps you decide which rate type suits you best. Here are some examples to help you think about your own situation.

  • I want to know exactly what my repayments are each month. You might want to go with a fixed rate loan. With the certainty of an unchanging rate you can budget safe in the knowledge that your repayments won't vary. This means you can basically forget about your home loan for the fixed period.
  • I want the lowest possible rate and I'm happy to switch lenders. Go with a variable loan (probably). Variable rates are usually more competitive than fixed rates, although that's not always the case. But if you're a deal hunter who's always after a lower rate and is happy to compare and refinance regularly, then a variable mortgage probably gives you more options and is easier to refinance.
  • I want to repay my loan as quickly as possible. In this case you want the lowest interest rate and a mortgage which allows for extra repayments. This is more likely a variable rate but some fixed rate loans allow extra repayments too.

Split rate loans

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. A split rate home loan is when you divide your loan into two (or more) portions; one locked into a fixed rate and the other variable. This lets you enjoy some of the advantages of both rate types at the same time.

Compare fixed, variable and split rate loans

Rates last updated December 14th, 2019
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000
2.84%
2.84%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.99%
3.01%
$500 (waived for loans above $150,000)
$0 p.a.
80%
Online only cashback offer: Refinancers borrowing $250,000 or more can get a $4,000 cashback for their first application (Other terms, conditions and exclusions apply). Buyers and refinancers can get this competitive variable interest rate. Application fee waived for loans above $150,000.

loans.com.au Smart Home Loan - (Owner Occupier, P&I)
2.88%
2.90%
$0
$0 p.a.
80%
Get one of the lowest variable interest rates on the market and pay 0 application or ongoing fees.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
3.03%
3.04%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000.
Tic:Toc Live in 10% deposit Variable Rate - Principal & Interest
2.79%
2.80%
$0
$0 p.a.
90%
Get a very low interest rate and pay no application, settlement or valuation fees. Apply online for full approval in real time and add a 100% offset account for $10 a month.

Compare up to 4 providers

Rates last updated December 14th, 2019
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, P&I)
2.69%
3.19%
$395
$0 p.a.
80%
An online home loan offer with a fixed interest offer for 3 years.
Virgin Reward Me Fixed Rate Home Loan - 2 Year $300k+ Special offer (Owner Occupier, P&I)
2.79%
3.30%
$0
$10 monthly ($120 p.a.)
80%
Buy your home and lock in a low rate for the first two years. Available with a 10% deposit.
Tic:Toc Live in Loan Fixed Rate Home Loan - 3 Year (Owner Occupier, P&I)
2.84%
2.92%
$0
$0 p.a.
90%
Apply online and get fast approval for this fixed rate, low-fee loan with redraw facilities. Add a 100% offset account for $10 a month.
Hume Bank Intro Package - 2 Year Fixed (Owner Occupier P&I)
2.88%
4.11%
$0
$375 p.a.
95%
$2,000 cashback for eligible refinancers. Get a very low fixed interest rate for two years plus package discounts. Available with a 5% deposit.
Greater Bank Great Rate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)
2.79%
3.82%
$0
$0 p.a.
90%
Get one of the lowest rates on the market with this fixed rate mortgage. Available with just a 10% deposit. Guarantor option available. NSW, QLD and ACT residents only.

Compare up to 4 providers

Rates last updated December 14th, 2019
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
State Custodians Low Rate Home Loan with Offset - LVR up to 80% (Owner Occupier, P&I)
2.90%
2.92%
$0
$0 p.a.
80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
Hume Bank Intro Package - 2 Year Fixed (Owner Occupier P&I)
2.88%
4.11%
$0
$375 p.a.
95%
$2,000 cashback for eligible refinancers. Get a very low fixed interest rate for two years plus package discounts. Available with a 5% deposit.
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.99%
3.01%
$500 (waived for loans above $150,000)
$0 p.a.
80%
Online only cashback offer: Refinancers borrowing $250,000 or more can get a $4,000 cashback for their first application (Other terms, conditions and exclusions apply). Buyers and refinancers can get this competitive variable interest rate. Application fee waived for loans above $150,000.

loans.com.au Smart Home Loan - (Owner Occupier, P&I)
2.88%
2.90%
$0
$0 p.a.
80%
Get one of the lowest variable interest rates on the market and pay 0 application or ongoing fees.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
3.03%
3.04%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000.

Compare up to 4 providers

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Important Information*
Logo for St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)

Online only cashback offer: Refinancers borrowing $250,000 or more can get a $4,000 cashback for their first application (Other terms, conditions and exclusions apply). Buyers and refinancers can get this competitive variable interest rate. Application fee waived for loans above $150,000.

Logo for UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 2.84% p.a. and a 2.84% p.a. comparison rate.

Logo for Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)

Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000.

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2 Responses

  1. Default Gravatar
    CathNovember 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?

    • Default Gravatar
      JodieNovember 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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