With fixed home loan rates dipping below 5% in Australia, many homeowners are asking the big question: is now the time to lock in a fixed rate? The Reserve Bank of Australia (RBA) has cut the cash rate three times in 2025, most recently in August, bringing it down to 3.60%. This has prompted lenders to offer increasingly competitive fixed-rate deals, some as low as 4.79%* for owner-occupied and 4.99%* for investment. But is fixing your rate now the right move?
📉 The Current Rate Environment
After a long period of rate hikes to combat inflation, the RBA has shifted gears in 2025, responding to easing inflation and slowing economic growth. The big four banks are forecasting at least one more rate cut before the end of the year, with some predicting the cash rate could fall to 3.10% by early 2026.
This downward trend has already influenced fixed-rate offerings. Fixed rates for terms under three years have dropped by up to 0.47% for owner-occupiers. Some of the best fixed rates now sit between 4.79% and 4.99%, depending on the term and lender.
🔒 The Case for Fixing Now
- Certainty in repayments: Ideal for budgeting and financial planning.
- Protection from future rate hikes: If inflation unexpectedly rebounds, fixed rates shield you from rising costs.
- Peace of mind: Especially valuable if your household finances are tight or you’re risk-averse.
If you’re considering a short-term fixed rate (1–2 years), you could benefit from current low rates while retaining flexibility to reassess later.
🤔 The Case for Waiting
- You might miss out on further rate cuts: If the RBA continues to ease policy, variable rates could fall further.
- Break fees: Exiting a fixed loan early can be costly.
- Less flexibility: Fixed loans often limit extra repayments and may lack features like offset accounts.
⚖️ What About a Split Loan?
In uncertain times, a split loan—part fixed, part variable—can offer the best of both worlds. You gain some repayment certainty while still being able to benefit from potential rate drops and make extra repayments on the variable portion.
🧠 Final Thoughts: Should You Fix?
There’s no one-size-fits-all answer. Here’s how to decide:
- Fix if: You value certainty, are risk-averse, or want to lock in a historically low rate for peace of mind.
- Float if: You’re comfortable with some risk, want flexibility, or believe rates will fall further.
- Split if: You want a balanced approach that offers both stability and adaptability.
With sub-5% fixed rates now available and more cuts potentially on the horizon, now could be a smart time to fix—especially for short terms. But your decision should ultimately reflect your financial goals, risk tolerance, and life plans.
Get in touch if you’d like to review your options, or book an appointment.
*Fixed rate examples are 2 year fixed rate 4.79% owner-occupied rate (comparison rate 5.74%), based on a $600,000 home loan with a LVR (loan to value ratio) less than 80%. 2 year fixed rate 4.99% investment rate (comparison rate 5.80%), based on a $600,000 home loan with a LVR (loan to value ratio) less than 80%.