With the Reserve Bank of Australia taking a cautious stance on future rate cuts, some bank economists are predicting that rate cuts may not be coming soon, many homeowners are asking the same question:
“Should I fix my home loan, or stay variable?”
It’s not a one-size-fits-all answer — but we’ve run a comparison on a $500,000 loan over 25 years, to see what impact fixing would do over 2 years.
Fixed vs Variable: The Comparison*
Fixed Rate Option
- Rate: 4.75% for 2 years, then 5.42% variable for the remaining 23 years (Comparison rate 5.42%)
- Monthly repayments: $2,851 for 2 years, then $3,034
- Total interest paid: $46,520
- Total loan cost: $46,820 (including $300 setup fee)
- Balance after 2 years: $478,106
Variable Rate Option
- Rate: 5.42% variable over 25 years (Comparison rate 5.45%)
- Monthly repayments: $3,047
- Total interest paid: $53,184
- Total loan cost: $53,184
- Balance after 2 years: $480,066
What the Numbers Tell Us
The fixed option delivers a comparative saving of around $6,664 over 2 years (if rates don’t change) — mainly due to the lower rate and smaller repayments during the fixed period. With the above example there’s an option to over-pay so continuing to pay the existing $3,047 per month whilst fixed would leave a balnce in 2 years of $473,171.00, meaning a saving of $6,895 over the 2 years.
Fixing can give your cash flow benefits in the short term. It can be a smart move for those managing higher costs or looking to redirect funds elsewhere. Of course, you can always split loans and edge your bets by taking part fixed and part variable.
Why Fixing Still Has Merit
Even with fewer rate cuts on the horizon, fixing part or all of your loan can still make good sense. Bear in mind when applying there may be a fixed rate lock-in fee applicable if you want to guarantee that rate at settlement.
✅ Budget Certainty – Knowing exactly what your repayments will be for two years brings peace of mind in uncertain times.
✅ Short-Term Savings – Lower repayments free up cash flow when household budgets are tight.
✅ Some Flexibility – Most fixed product allows for extra repayments (fixed rate example allows up to $25,000 extra over the fixed rate period), giving you a bit of wiggle room to pay down faster if things improve.
When Staying Variable Might Work Better
💡 Redraw Freedom – The variable option gives you unlimited redraw access, handy for managing cash flow or emergencies.
💡 Offset – You can offset your variable rate home loan (if applicable), most fixed rates do not have an offset option.
💡 Rate cut – Potential for future rate cuts, not passed on if a fixed rate.
So… Should You Fix or Stay Variable?
It really comes down to your goals. If you value repayment certainty and want short-term savings, a fixed rate could be the smarter choice. If flexibility and long-term equity building are more important, staying variable may suit you better.
The key is to make the decision based on your lifestyle and financial goals — not just market speculation.
Check out our comparison calculator to see how a fixed rate compares.
Let’s Tailor the Right Strategy for You
Every borrower’s situation is different, and a well-structured strategy can make a big difference to your long-term wealth.
At Fox Mortgage Services, we can help you:
- Compare competitive fixed and variable options from multiple lenders
- Model repayments based on your personal goals
- Find a balance between flexibility, certainty, and savings
Ready to find the right fit for your home loan?
📞 Book a free chat with a Fox Mortgage broker today — and make sure your home loan strategy works as hard as you do.
*loan comparison is for a $500,000 loan over 25 years. Basic variable rate home loan used with a rate of 5.42% (comparison 5.45%) and a 2 year fixed rate of 4.75% reverting to a 5.42% basic variable home loan rate (comparison rate 5.42%). Figures are for general information only and do not constitute an offer of credit.