Fixed vs variable home loan interest rates

Last updated: 16 September 2026

When you take out a home loan, one of the biggest decisions is whether to choose a fixed or variable interest rate. 

Choosing a home loan 

Buying a home is a big financial commitment, and choosing the best home loan for you is important. 

Even small differences in interest rates, fees and loan features can add up to thousands of dollars over the life of a loan. One of the biggest decisions you'll make is whether to choose a fixed or variable interest rate. 

Each option has benefits and drawbacks. The right choice depends on your budget, circumstances and how much certainty or flexibility you need. 

What is a fixed rate home loan? 

A fixed interest rate stays the same for a set period, usually between one and five years. During that time, your repayments won't change, even if market interest rates rise or fall. 

When the fixed period ends, your loan will usually move to the lender's variable interest rate (revert rate) unless you switch home loans or agree to another fixed-rate period. 

Benefits of a fixed rate home loan 

• you'll know exactly what your repayments will be
• budgeting can be easier
• you're protected if interest rates rise during the fixed period. 

Things to consider 

• you won't benefit if interest rates fall
• you may be charged a break fee if you switch home loans, sell the property or pay off the loan early 
• some fixed-rate loans have fewer features (like offset accounts or the ability to make extra repayments) than variable loan. 

Questions to ask before choosing a fixed-rate home loan 

• What variable interest rate (revert rate) is likely to apply when the fixed period ends? 
• How much could my repayments increase? 
• Can I switch to another loan when the fixed period ends? 
• What fees or charges could apply if I refinance before the end of the fixed-rate period? 

Understanding what happens after the fixed period can help you avoid unexpected increases in your repayments. 

What is a variable rate home loan? 

A variable interest rate can go up or down over time. Your lender decides whether to change the rate and by how much. 

Changes to the RBA cash rate may influence variable home loan rates, but lenders can also change rates for other reasons. If your interest rate rises, your repayments may increase. If it falls, your repayments may decrease. 

Benefits of a variable rate 

• your repayments may decrease if interest rates fall
• it is often easier to refinance or switch loans 
• many variable loans allow extra repayments 
• features such as offset accounts and redraw facilities are often available. 

Things to consider 

• your repayments can increase unexpectedly when interest rates change
• budgeting can be more difficult because costs may change. 

Questions to ask before choosing a variable-rate home loan 

• How much could my repayments increase if interest rates rise? 
• When and how will the lender tell me that my interest rate or repayments are changing? 
• Does the loan allow extra repayments without fees? 
• Are features such as an offset account or redraw facility available? 
• What fees or charges could apply if I refinance or switch loans? 

In particular, if you're borrowing close to your limit, think carefully about how you would manage higher repayments if interest rates rise. 

Compare fixed and variable home loan rates

Fixed rate	Variable rate
Repayments stay the same during the fixed period	Repayments can rise or fall
Can make budgeting easier	Can make budgeting less predictable
Protects you from rate rises during the fixed period	You may benefit if rates fall
May limit extra repayments	Often allows extra repayments
Break fees may apply if you switch or refinance	It is often easier to switch loans
May have fewer loan features	Offset and redraw features are often available
Usually moves to a variable rate when the fixed period ends	Continues as a variable rate unless you switch or change the loan

 A split home loan gives you some of both 

 A split home loan divides your loan into two parts. One part has a fixed rate and the other has a variable rate. You can agree with the lender how much of the loan to allocate to each part. 

 A split loan can give you: 

• more certainty over repayments on the fixed part 
• flexibility to make extra repayments on the variable part 
• access to features that may be available on the variable part. 

A split loan can also be more complex. Different rates, fees, features and conditions may apply to each part, so check the total cost before you choose. 

Questions to ask about a split loan 

• How much of the loan will be fixed and how much will be variable? 
• What fees apply to each part? 
• Can I make extra repayments on either part? 
• Which part can be linked to an offset account? 
• What happens to the fixed part when the fixed period ends? 

Work out what you can afford to borrow 

No matter what type of home loan you choose, be realistic about what you can afford. 

Use the Moneysmart mortgage calculator to see how a higher interest rate could affect your repayments and the total cost of your loan. 

Try more than one interest rate so you can see whether your budget has room for repayments to rise – ideally calculate what your costs would be if interest rates went up by 3%.  

 Look beyond just the home loan interest rate 

The home loan interest rate is not the only cost to compare. It's important to also compare fees, loan features and repayment amounts. Also think about how much certainty or flexibility you may need in future. 

Read our guidance on choosing a home loan to understand what to compare and what to ask a lender or mortgage broker.

Use the mortgage calculator to compare repayments and the total cost of a loan at different interest rates.

If you are considering an offset account or redraw facility, learn how they work and check the fees, conditions and access rules.