Fixed vs Variable Rates: What You Need to Know in 2026

It's the question we get asked most often: should I fix my interest rate or stay variable? In 2026, with inflation stabilising and the RBA making calculated moves, the answer isn't as simple as it was a few years ago. Here's how to think about it.

The Case for Variable Rates

Variable rates move with the market. When the RBA cuts the cash rate, your repayments go down. The biggest advantage of a variable rate is flexibility.

• Unlimited Extra Repayments: You can pay off the loan as fast as you want without penalty.

• Offset Accounts: Variable loans usually come with 100% offset accounts, letting you use your savings to reduce daily interest charges.

• Easy to Refinance: If you find a better deal elsewhere, you can leave without paying break costs.

  
  

If you expect interest rates to drop, or you plan to sell the property or make large lump-sum payments soon, staying variable is usually the smart play.

The Case for Fixed Rates

Fixed rates lock in your interest rate for a set period, usually 1 to 5 years. The biggest advantage is certainty.

• Budgeting Peace of Mind: You know exactly what your repayment will be every month, regardless of what the RBA does.

• Protection from Rate Hikes: If rates go up, yours stays the same.

Fixed rates come with trade-offs. You usually can't make significant extra repayments (often capped at $10,000 a year), they rarely include offset accounts, and breaking the fixed term early can mean break costs running into the tens of thousands.

The Hybrid Approach

You don't have to choose just one. Many of our clients use a split loan. For example, fixing 70% of the loan for stability while keeping 30% variable. This gives you an offset account and the ability to make extra repayments on the variable portion at the same time.

Ultimately, fixing your rate is a hedge against inflation, not a strategy to beat the bank. Choose fixed for certainty, choose variable for flexibility.