TLDR
- Fixed rates offer repayment certainty for a set period.
- Variable rates can move up or down over time.
- Split loans may offer a balance of both.
- The right option depends on your goals and budget.
Choosing between a fixed and variable home loan rate is one of the most common questions borrowers face. Each option has benefits and trade-offs, and the right choice depends on your financial goals, lifestyle, and comfort with repayment changes. A broker can help you compare your options.
What is a fixed rate loan?
A fixed rate loan locks in your interest rate for a set period, usually between one and five years. This means your repayments stay the same during that time, which can help with budgeting. However, fixed loans may have limits on extra repayments, redraw access, or flexibility if you want to refinance or sell.
What is a variable rate loan?
A variable rate can change over time depending on market conditions and lender decisions. Your repayments may increase or decrease as rates move. Variable loans often offer more flexibility, such as extra repayments, redraw facilities, or offset accounts, but they can make budgeting harder if repayments rise.
Could a split loan be suitable?
A split loan allows you to divide your home loan into fixed and variable portions. This may give you some repayment certainty while still keeping access to flexible features. For example, you might fix part of your loan and leave the rest variable to use an offset account or make extra repayments.
There is no one-size-fits-all answer when choosing a home loan structure. Talk to your broker to compare fixed, variable, and split loan options based on your personal goals and financial situation.