Pros and cons of fixed and variable interest rates

Which is better? Fixed or interest?

Short answer: it depends.

Long answer: there are pros and cons to both, and the right option for you will of course depend on your current financial situation and your financial goals. Your mortgage broker will be able to assess your situation and help you decide on the right option for you.

This article however, will aim to help you understand some of the key differences between fixed & variable, and some important things to consider when choosing one or the other.

What are fixed and variable interest rates?

Fixed rate home loans allow you to lock in or ‘fix’ your interest rate for a certain time period, usually between one and five years. This means that for the duration of the ‘fixed’ period, you will know exactly what your home loan repayments will be during that time.

Variable rate home loans don’t have a ‘fixed’ interest rate and therefore your repayments can go up and down depending on a number of factors, including the RBAs official cash rate which is determined on the first Tuesday of every month and therefore can change on a monthly basis.

Fixed interest rates

There are a number of perks that come with choosing a fixed interest rate home loan, but it also has its drawbacks. 


  • Your repayments are fixed and won’t go up if the official interest rate rises
  • Budgeting is easier as you will know exactly what your repayments will be
  • You’ll have the peace of mind knowing that your repayments won’t increase at short notice


  • If interest rates fall, your repayments won’t go down
  • Additional repayments are usually limited
  • You will usually be penalised if you pay your home loan off early
  • Features like a redraw facility or offset accounts are usually unavailable

Variable interest rates

Like fixed rate mortgages, variable interest rates also have their strengths and weaknesses.


  • Extra repayments are allowed which can help you pay your home loan off quicker
  • If interest rates go down you will benefit from lower monthly repayments
  • Variable rate home loans usually come with additional features such as offset accounts


  • If interest rates go up your monthly repayments will increase
  • It’s harder to budget because your repayments can fluctuate

As of writing this article, interest rates are at record lows. Now is the time to review your finances and make sure your loan is still competitive in the current market.

With access to a large variety of lenders, we can help find a great deal. refinance your mortgage and stop paying the banks more than you have to!

To learn more about refinancing you can read this short article about why you should consider refinancing your home loan.

Fixed VS Variable, which is right for me?

That’s where we come in.

As your local mortgage broker, we’ll find you a loan product that suits your individual financial circumstances and will put you in the best possible financial position.

In fact, we’re legally obligated to act in the best interest of our clients. Plus, we don’t charge you anything for our services. We know it sounds too good to be true, but we promise it isn’t!

So with over 65 years of combined industry experience, we have the ‘experience you can rely on’. Get in touch today for a free appointment and let’s find the perfect home loan for you.