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Fixed or Variable Home Loan

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

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A couple signing a home loan contract.There are two types of home loan interest rate, variable and fixed. In short:

  • Variable interest rates can change at any time (up or down) and tend to offer slightly lower rates and more repayment flexibility.
  • Fixed interest rates cannot go up (or down) for the fixed period (usually 1-5 years) but often have more fees and less flexibility.

Both rate types 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.

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

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

Data indicated here is updated regularly
$
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
Athena Celebrate Home Loan - 60% LVR  Owner Occupier, P&I
2.34%
2.34%
$0
$0 p.a.
60%
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
2.29%
2.72%
$0
$8 monthly ($96 p.a.)
95%
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.64%
2.66%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
$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.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.59%
2.60%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
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Data indicated here is updated regularly
$
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)
2.14%
2.41%
$395
$0 p.a.
80%
A competitive fixed interest rate loan with no ongoing fees. Requires a 20% deposit.
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Year (Owner Occupier, P&I)
2.29%
3.53%
$0
$395 p.a.
95%
Up to $3,000 refinance cashback.
Competitive fixed rate loan available with a 5% deposit. Eligible borrowers refinancing $250,000 or more can get up to $3,000 cashback. Other conditions apply.
HSBC Fixed Rate Home Loan - 2 Year Fixed Rate LVR 80% or below (Owner Occupier, P&I)
2.09%
2.98%
$0
$0 p.a.
80%
Lock in a competitive fixed rate for 2 years and buy your home with a 20% deposit.
Well Home Loans Balanced Fixed Home Loan - 2 Year (Owner occupier, P&I)
2.22%
2.21%
$250
$0 p.a.
90%
A low fixed mortgage with an optional 100% offset account. Not available for construction purposes.
Virgin Money Reward Me Fixed Rate Home Loan - 2 Year $300k+ Special offer (Owner Occupier, P&I)
2.29%
2.87%
$300
$10 monthly ($120 p.a.)
80%
$3,000 refinance cashback.
Buy your home and lock in a low rate for the first two years. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 29 November 2020 and settle by 28 February 2021.
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Data indicated here is updated regularly
$
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
CUA Achieve Variable Home Loan - $500k+ (Owner Occupier, P&I)
2.55%
2.60%
$600
$0 p.a.
95%
Home buyers can get a competitive, low-fee variable rate plus a 100% offset account. Low deposit option available. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs. Eligible refinancers can get a $2,000 pre-paid credit card when they switch to CUA.
HSBC Fixed Rate Home Loan - 2 Year Fixed Rate LVR 80% or below (Owner Occupier, P&I)
2.09%
2.98%
$0
$0 p.a.
80%
Lock in a competitive fixed rate for 2 years and buy your home with a 20% deposit.
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier, P&I)
2.49%
4.12%
$595
$0 p.a.
90%
$2,000 refinance cashback
Investors can take advantage of a short term fixed rate with no ongoing fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
AMP Bank Professional Package Fixed Loan - 3 Year (Owner Occupier, P&I)
2.49%
3.13%
$0
$0 p.a.
90%
A package home loan with a sharp fixed rate and a 10% deposit option for low deposit borrowers.
Bankwest Complete Home Loan Package Variable - $200k to <$750k LVR ≤80% (Owner Occupier, P&I)
2.73%
3.18%
$0
$395 p.a.
80%
A low variable rate loan with a 100% offset account and package discounts.
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Home Loan Offers

Important Information*
Logo for Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)

Up to $3,000 refinance cashback. A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.

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)

Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).

Logo for Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I

A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.

Logo for UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate

Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.

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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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