Mortgage Guide
Fixed vs Variable Interest Rates
Certainty vs flexibility. Understanding both rate types helps you make a better choice for your circumstances.
Fixed Rate
Your interest rate is locked for a set period — typically 1, 2, 3, or 5 years. Your repayment amount does not change during that period.
Advantages
- Predictable repayments
- Protected from rate rises
- Easier budgeting
Disadvantages
- Miss out if rates fall
- Break costs if you exit early
- Extra repayments often capped
Variable Rate
Your interest rate moves with the market, typically tracking the central bank cash rate. Repayments change when rates move.
Advantages
- Benefit when rates fall
- Usually allows unlimited extra repayments
- No break costs
Disadvantages
- Repayments can rise
- Less certainty for budgeting
- Exposure to market volatility
Split Loans
Many borrowers choose a split loan — part fixed, part variable. For example, 60% fixed and 40% variable. This provides partial certainty while keeping some flexibility for extra repayments and potential rate reductions.
Example: $640,000 loan
Which Should You Choose?
The right choice depends on your risk tolerance, budget flexibility, and market outlook. Consider:
- Fix if you value certainty and rates are low relative to historical averages.
- Stay variable if you plan to make significant extra repayments or sell in the short term.
- Split if you want a balance of certainty and flexibility.
- Always compare the fixed and variable rates on offer — the gap matters.
This is general information only
The right rate structure depends on your personal circumstances. Speak with a licensed mortgage broker before deciding.
Stress-test a rate change
Model what happens if your variable rate increases by 1–4% using the Rate Stress Test simulator.
Open Rate Stress Test