Forget rate predictions. This is the question to ask before fixing your home loan
Key takeaways
- Stop trying to predict exactly where interest rates are headed; even the RBA predicts continued uncertainty.
- Ask: "If I'm wrong about where rates go next, will I still be happy with my decision?"
- Before deciding, compare your current rate with what else is available: switching could save you money, with some lenders offering cashback of up to $4,000.
Trying to predict what will happen to interest rates is a bit like trying to predict the weather on your wedding day 6 months from now.
You can look at the forecasts, listen to the experts and make an educated guess, but there's no way you can know for sure.
That's why I think too many borrowers are asking themselves the wrong question about their home loan.
When you're trying to decide whether to fix your home loan, many are asking: "Where are interest rates going and should I fix my rate before they increase again?"
It's the wrong question – here's the right one
Nobody knows exactly where interest rates will be in 6 months, 1 year or 2 years.
So stop trying to win the rate-prediction game and don't try to outguess the RBA.
Instead, decide whether certainty is worth paying for and before you fix your home loan, ask yourself:
"Could I live with this decision if I turn out to be wrong?"
If your answer is "yes, I'd be happy – because fixing gives me peace of mind that my repayments won't change for the next x years and my budget can't handle another increase…"
Then fixing could be the right move.
If the answer is "no, I'd be really annoyed – the thought of being stuck paying a higher rate while everyone else benefits from rate cuts would drive me mad…"
Then staying variable may give you the flexibility you value more.
Meet Henrietta. She decided to fix her home loan rate in March for 2 years. Henrietta is happy that:
- She has 2 years of knowing exactly what her repayments are
- She's able to budget based on the fixed cost of her home loan
- She can tune out when chat turns to the RBA and interest rates
- She doesn't need to worry about another rate rise – for now, at least
Now meet Homer. He decided to stay on a variable rate in March. He knows rates could go either way, but he's comfortable with that uncertainty. Homer is happy that:- He can make extra repayments if he wants to
- He has room in his budget to manage more hikes, if they happen
- He can benefit from future rate cuts if they happen (after all, the Big 4 banks are predicting rate cuts in 2027…)
- Although rates have increased a couple of times since he made this decision, they've been on hold ever since
Note that neither of these hypothetical home owners are trying to beat the RBA. They're making decisions that suit them, their budget and their goals.
If you're wrestling about whether to fix or not ask yourself 3 things
- Can I comfortably afford my repayments if rates rise further? If the answer is no, certainty could have real value.
- How would I feel if variable rates fell after I fixed? You might fix and end up paying more than a variable borrower and that's a trade-off you need to be comfortable making. The opposite could also happen!
- Am I fixing for certainty or because I'm trying to beat the market? The RBA raised the cash rate 3 times in 2026, from 3.60% to 4.35%, before holding it in June, and they've made it clear that the future path remains uncertain.
You don't need to know what the RBA will do next to make a good decision about your home loan. You just need to know what outcome you can live with if you're wrong.
While you're thinking about your home loan: have you compared it recently? With cashback home loan deals of up to $4,000 it's a great time to shop around
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