Variable vs fixed home loan

Keen to know the difference between a fixed and variable loan? It's about flexibility, interest rates and features – we show you how to work out the best fit for you.

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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

$
years
Name Product Interest Rate (p.a.) Comp. Rate (p.a.) Fees Monthly Payment

Athena Variable Home Loan P&IHome≥ 40% Deposit

Athena Variable Home  Loan
1.99%
1.99%
  • App: $0
  • Ongoing: $0 p.a.
$554.81
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.

Well Home Loans Equity Plus P&IHome≥ 40% Deposit

Well Home Loans Equity Plus
1.87%
1.90%
  • App: $250
  • Ongoing: $0 p.a.
$545.86
Borrowers with 40% deposits or equity can get this low variable rate loan. 100% offset account included.

HSBC Home Value Loan P&IHome≥ 30% Deposit

HSBC Home Value Loan
2.19%
2.20%
  • App: $0
  • Ongoing: $0 p.a.
$569.91
$3,288 refinance cashback offer
This competitive variable rate loan is available for borrowers with 30% deposits. Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.

Nano Variable Home Loans P&IHome≥ 25% Deposit

Nano Variable Home Loans
1.99%
1.99%
  • App: $0
  • Ongoing: $0 p.a.
$554.81
Refinancers only. Switch to this competitive variable rate with zero fees. Requires a 25% deposit.

Macquarie Bank Basic Home Loan P&IHome≥ 40% Deposit

Macquarie Bank Basic Home Loan
2.29%
2.29%
  • App: $0
  • Ongoing: $0 p.a.
$577.55
Apply for the Macquarie Bank Basic Home Loan - LVR ≤ 60% (Owner Occupier, P&I) and get a low variable interest rate, plus no application and ongoing fees. Requires a 40% deposit.
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$
years
Name Product Interest Rate (p.a.) Comp. Rate (p.a.) Fees Monthly Payment

HSBC Fixed Rate Home Loan Package P&IHome 2Y Fixed≥ 20% Deposit

HSBC Fixed Rate Home Loan Package
1.88%
2.86%
  • App: $0
  • Ongoing: $390 p.a.
$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 P&IHome 1Y Fixed≥ 20% Deposit

UBank UHomeLoan Fixed
1.79%
2.32%
  • App: $0
  • Ongoing: $0 p.a.
$539.94
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.

Suncorp Home Package Plus Fixed P&IHome 2Y Fixed≥ 20% Deposit

Suncorp Home Package Plus Fixed
1.89%
2.85%
  • App: $0
  • Ongoing: $0 p.a.
$547.35
$3,000 refinance cash bonus
Lock in a low fixed rate for 2 years. Available with a 20% deposit. Eligible new borrowers can get the annual package fee reimbursed for the life of the loan. $3,000 refinance cash bonus for eligible borrowers. Other terms, conditions and eligibility criteria apply.

Greater Bank Great Rate Fixed Home Loan P&IHome 1Y Fixed≥ -10% Deposit

Greater Bank Great Rate Fixed Home Loan
1.69%
3.49%
  • App: $0
  • Ongoing: $0 p.a.
$532.6
Get one of the lowest rates on the market with this fixed rate mortgage. NSW, QLD and ACT residents only.

Homestar Star Classic Owner Occupied Fixed Special P&IHome 2Y Fixed≥ 20% Deposit

Homestar Star Classic Owner Occupied Fixed Special
1.79%
2.16%
  • App: $0
  • Ongoing: $395 p.a.
$539.94
Fix to a low rate for two years. Ongoing fee only applies while the rate is fixed. Requires a 20% deposit.