Breakdown of pros, cons, and when to choose each.
A fixed rate gives you repayment certainty for a set period, which can make budgeting easier. This can be useful if you prefer stability or expect rates to rise.
The trade-off is reduced flexibility. Fixed loans may limit extra repayments, redraw access, or early refinance options during the fixed term.
A variable rate can move up or down with market conditions and lender pricing. It often comes with greater flexibility such as extra repayments, offset accounts, and redraw features.
The downside is uncertainty. If rates rise, your repayments can increase and put pressure on your monthly budget.
Choose fixed if certainty matters more than flexibility. Choose variable if you want features and can tolerate rate movement.
Some borrowers split their loan between fixed and variable to balance stability with flexibility.