Variable vs fixed home loans – which is right for you? | Finder

Fixed or Variable Home Loan

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

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

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 updated regularly
$
years
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Athena Variable Home  Loan
2.19%
2.19%
$0
$0 p.a.
60%
$569.91
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.
Macquarie Bank Basic Home Loan
2.49%
2.49%
$0
$0 p.a.
60%
$593.01
A competitive variable rate home loan for owner-occupiers. Requires a 40% deposit. Refinancers can switch with a convenient digital application.
Suncorp Back to Basics Home Loan
2.44%
2.45%
$0
$0 p.a.
80%
$589.12
A competitive variable interest rate loan with low fees. The establishment fee is waived if you borrow $150,000 or more.
Westpac Flexi First Option Home Loan
2.29%
2.72%
$0
$8 monthly ($96 p.a.)
95%
$577.55
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
2.49%
2.51%
$0
$0 p.a.
80%
$593.01
Up to $4,000 refinance cashback
Get this low-rate variable loan with a 20% deposit and pay $0 application fee. Borrow from $150k (or $250k to be eligible for the cashback offer) (terms, conditions & exclusions apply).
loading

Compare up to 4 providers

Data updated regularly
$
years
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
HSBC Fixed Rate Home Loan Package
1.88%
2.86%
$0
$390 p.a.
80%
$546.6
$3,288 refinance cashback offer
Lock in a low fixed rate for 2 years and buy your home with a 20% deposit. Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.
UBank UHomeLoan Fixed
1.75%
2.22%
$0
$0 p.a.
80%
$537
This very low fixed rate is only available until 29 April 2021. Other conditions apply. A competitive fixed rate loan with no ongoing fees. Requires a 20% deposit
Westpac Fixed Option Home Loan Premier Advantage Package
1.89%
3.46%
$0
$395 p.a.
95%
$547.35
Up to $3,000 refinance cashback.
Eligible borrowers refinancing $250,000 or more can get up to $3,000 cashback. Other conditions apply.
AMP Bank Professional Package Fixed Loan
1.99%
3.1%
$0
$0 p.a.
80%
$554.81
Get a low fixed rate package with no application or settlement fee. Available with a 20% deposit. Other fees and charges apply.
Suncorp Home Package Plus Fixed
1.89%
2.85%
$0
$0 p.a.
80%
$547.35
Lock in a low fixed rate loan for two years and get the annual package fee waived in the first year. Available for borrowers with 20% deposits.
loading

Compare up to 4 providers

Data updated regularly
$
years
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Suncorp Back to Basics Home Loan
2.44%
2.45%
$0
$0 p.a.
80%
$589.12
A competitive variable interest rate loan with low fees. The establishment fee is waived if you borrow $150,000 or more.
ME Flexible Home Loan Fixed with Members Package
1.99%
3.33%
$0
$395 p.a.
80%
$554.81
Lock in a competitive rate for owner occupiers for two years. Comes with a 100% offset account.
HSBC Fixed Rate Home Loan Package
1.88%
2.86%
$0
$390 p.a.
80%
$546.6
$3,288 refinance cashback offer
Lock in a low fixed rate for 2 years and buy your home with a 20% deposit. Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.
Newcastle Permanent Building Society Fixed Rate Home Loan
2.38%
3.72%
$595
$0 p.a.
90%
$584.48
$2,000 refinance cashback
Competitive fixed rate for home buyers.Available with a 10% deposit.$2,000 cashback for eligible refinancers borrowing $250,000 or more.
Heritage Bank Advantage Package Fixed
2.39%
3.15%
$0
$350 p.a.
95%
$585.25
Get a partial offset account and flexible repayments with this package loan.