Fixing your home loan rate comes down to one question: do you want certainty or flexibility? With the Reserve Bank of Australia (RBA) having lifted the national cash rate for a fifth time in 2026, this time to an 18-year high of 4.85%, it’s a question many current and future borrowers are weighing up.
A fixed rate home loan can take the stress out of budgeting when rates are climbing, but you could miss out if rates fall. Nailing how long to fix your home loan for and figuring out what to do at the end of your fixed period are critical.
What is a fixed rate home loan?
A fixed rate home loan has an interest rate that’s locked in for a set period. It doesn’t change during that time, even if your lender or the RBA updates rates. That means your repayments stay the same, too, so you’ll know exactly what you’ll pay each week, fortnight or month.
How do fixed rate home loans work?
When fixing your home loan’s rate, you choose how long to lock it in for. This is usually between one and five years, so you won’t be able to fix the entirety of a 25- or 30-year home loan.
When the fixed period ends, your loan reverts to your lender’s variable rate. You can opt to fix it again, switch to a variable rate home loan full-time or refinance to a different lender.
Another key factor to consider with fixing home loan rates is that additional repayments are typically capped or blocked during your fixed term. This means there are fewer options for fast-tracking your loan repayment.
How long should I fix my home loan’s rate for?
The ideal fixed term length for your home loan depends on how long you want certainty and how likely your plans are to change:
- 1 to 2 years: shorter terms give you certainty for a shorter time. They suit borrowers who might sell or refinance soon, or who want to reassess when the fixed period ends.
- 3 years: a three-year term sits in the middle. It’s long enough to plan your budget with confidence, but short enough to revisit before your circumstances change drastically.
- 4 to 5 years: longer terms give you the most certainty, but your rate stays locked in even if the market moves. If rates fall, you either stay on your higher rate or pay to leave early.
If you’re unsure which term suits you, a mortgage broker can help you weigh up your options.
Fixed rate home loans vs variable rate home loans
The main difference between fixed and variable rate home loans is how your rate moves (or doesn’t move) throughout your term. While fixed rates stay put, a variable rate remains open to fluctuation. Here are some of the key differences between the two:
| Fixed rate | Variable rate | |
|---|---|---|
| Interest rate | Stays the same for the fixed term | Can change at any time |
| Duration | One to five years | Up to your full mortgage term |
| Repayments | Stay the same during the fixed term | Can rise or fall |
| If rates rise | Your repayments are protected | Your repayments increase |
| If rates fall | You don’t benefit until the term ends | Your repayments can drop |
| Extra repayments | Typically capped or blocked | Generally allowed without limits |
| Offset account | Less common | Commonly available |
| Leaving early | Break costs may apply | Often no exit fee |
Lenders set fixed rates based on where they expect rates to head. That means they tend to sit above variable rates when rises are expected and below them when cuts are on the horizon.
Start with your plans, not the rate forecast
"Nobody can truly predict where rates will go in the years ahead, so it’s worth focusing on your own situation instead of trying to react to the market. How long do you plan to keep the loan? Could you afford your repayments if rates rose further? Do you want the option to pay your loan off faster? Your answers usually point you to the right term and structure."
How much will my fixed rate home loan cost?
Perhaps the biggest factor that impacts the cost of your fixed rate home loan is the rate itself. Even a small difference in rate adds up, as the table below shows for a three-year fixed term:
| Home loan size | Interest rate | Monthly repayment | Interest paid over three years | Loan balance after three years |
|---|---|---|---|---|
| $600,000 | 6.25% p.a. | $3,694 | $110,517 | $577,522 |
| $600,000 | 6.50% p.a. | $3,792 | $115,030 | $578,503 |
| $600,000 | 6.75% p.a. | $3,892 | $119,547 | $579,450 |
| $600,000 | 7.00% p.a. | $3,992 | $124,067 | $580,362 |
| Calculations based on a home loan repaid monthly with a fixed interest period of three years and are for illustrative purposes only. Rates are examples, not current offers, are not guaranteed and exclude fees. | ||||
Each 0.25% increase in rate adds about $100 a month to your repayment and roughly $4,500 in interest over the three years. However, several other variables affect what a home loan costs overall:
- Loan amount: the more you borrow, the more interest you pay.
- Loan term: a longer term lowers your repayments but increases the total interest you pay.
- Fixed term length: this affects the rate you’re offered and how long your repayments are protected.
- Repayment type: interest only repayments are lower at first, but you don’t pay down your loan balance.
- Deposit size: a smaller deposit means a higher loan to value ratio (LVR), which can add lenders mortgage insurance (LMI) and a higher rate.
Fixed home loan rate fees to look for
The interest rate is only part of the cost. When comparing fixed rate home loans, check for:
- Application or establishment fee: a one-off fee for setting up the loan.
- Annual or package fee: an ongoing fee, often charged if the loan comes with extras like an offset account or credit card.
- Rate lock fee: some lenders charge to lock in your fixed rate between application and settlement.
- Break costs: charged if you leave during your fixed term. The amount depends on your loan size, how much of the term is left and how rates have moved. Your break costs can be significant.
- Discharge fee: a fee for closing the loan when you sell or refinance.
The pros and cons of fixed rate home loans
Pros
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Protection against rising rates
If rates go up during your fixed term, your repayments don’t. You’re protected for as long as your rate is locked in.
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Easier budgeting
Your repayments stay the same, so you know exactly what’s leaving your account each week, fortnight or month.
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Low fuss
There’s no need to keep track of rate changes until your fixed term ends.
Cons
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No benefit from rate drops
If rates fall during your fixed term, your repayments don’t. You’ll have to wait until your term ends or pay break costs to leave early.
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Limits on extra repayments
Additional repayments are typically capped, and offset accounts are less common on fixed loans. That can slow down how quickly you pay off your loan.
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Break costs if you leave early
Selling or refinancing during your fixed term can trigger break costs, which can be significant.
Fixed vs split rate home loans
A split home loan divides your loan into two parts: one with a fixed rate and one with a variable rate. You can choose the proportions, such as 70% fixed and 30% variable.
That lets you lock in part of your repayments while keeping the rest flexible. You can use an offset account and make extra repayments on the variable portion, and you benefit, at least in part, if rates fall. However, there are a few factors to consider before you split your home loan:
- Some lenders may charge fees on both loan accounts
- Refinancing can be more complicated and costly with two loan accounts
- An offset account only reduces interest on the variable portion, so a large offset balance may not be used to full effect
Splitting vs fixing your loan
Natasha is tossing up whether to fix her home loan interest rate or split her $600,000, 30-year home loan. She doesn’t have an offset account and isn’t too interested in making additional payments, but she is considering whether to leave part of her loan open in case rates drop.
She does some quick calculations to estimate how much a 50-50 split would cost compared to a full fixed period, both over three years:
| Home loan | Interest rate | Fortnightly repayment | Total interest over three years |
|---|---|---|---|
| 50% variable ($300,000) | 6.25% p.a. | $1,847 | $55,258 |
| 50% fixed ($300,000) | 6.50% p.a. | $1,896 | $57,515 |
| 100% fixed ($600,000) | 6.50% p.a. | $3,792 | $115,030 |
| Calculations are based on monthly principal and interest repayments over a 30-year loan term and are for illustrative purposes only. Rates are examples, not current offers, are not guaranteed and exclude fees. | |||
The total interest payable on the split loan is $112,773, compared to $115,030 on the fully fixed loan. That is a saving of $2,257 over the initial three years, or about $49 a month.
This assumes the variable rate stays the same, which may not be the case in reality, and it doesn’t include the additional fees associated with splitting the loan. If the variable rate rose by 0.50% and stayed there, the split loan would cost roughly $2,250 more than fixing.
Natasha decides to go for the split home loan, as she’s attracted to its versatility and ability to make additional payments towards the variable half, even with potentially higher fees to maintain it.
How to apply for a fixed rate home loan
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Complete your online application
Tell us about yourself and the home loan you’re after.
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Submit your documents
Supply your broker with the required ID and financial docs.
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Speak to us
Talk with your broker and discuss your fixed home loan options.
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Get pre-approved
From there, your conditional approval gives you a budget to shop within.
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Secure your home purchase
Once you’ve found the one, buy it at auction or via an offer.
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Formal application and approval
Your Savvy broker will handle the heavy lifting throughout the process, from formal application to full approval.
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Settlement
Once everything’s approved, you can sign off and the keys are yours!
Why apply for a home loan with Savvy
Fixed or variable home loan rate: which is best for me?
There’s no single best choice of home loan; it comes down to how much certainty you need and how much flexibility you want. Here are some situations where one loan type may be more suitable than the other:
- You want to know exactly what your repayments will be for an extended period
- A rate rise would put pressure on your budget
- You’re a property investor who wants predictable cash flow
- You don’t expect to sell or refinance during the fixed term
- You want to make extra repayments or use an offset account
- You might sell or refinance soon
- You could comfortably afford higher repayments if rates rose
- You want to benefit if rates fall
If you want a bit of both, a split loan lets you fix part of your loan and keep the rest variable. Applying with a mortgage broker can help you weigh up which option suits your situation before you submit your application.
