Fixed or Variable? The Question Every Borrower Is Asking Right Now

This is the question I get asked more than any other right now: should I fix my rate? After four RBA rises in 2026 when most forecasters were calling for cuts, I understand why — nobody wants to be the person who guessed wrong again.

Last reviewed: 22 October 2026. Figures reflect the RBA’s 29 September decision (cash rate 4.60%). I will review again after the 3 November meeting.

Here’s the thing: the honest answer isn’t “fix” or “don’t fix.” It’s a framework for deciding, because the right call depends on your situation, not the RBA’s.

What Fixing Actually Buys You

A fixed rate isn’t a bet that rates will rise — it’s insurance against your budget being able to absorb it if they do. You’re paying for certainty, and certainty has a price: fixed rates are usually set slightly above the current variable rate to cover the bank’s own risk in locking it in.

If your household budget is genuinely tight — one more rate rise and something has to give — that certainty is worth real money, even if it costs you a little more overall.

What Staying Variable Actually Buys You

Flexibility. Most variable loans let you make extra repayments, redraw, or refinance without the break costs a fixed loan carries. If your budget has genuine buffer and you’d rather keep your options open than lock in, variable is the more forgiving structure — you’re just accepting that your repayment can move both ways.

The Break-Cost Trap

The single biggest mistake I see is someone fixing for peace of mind, then needing to refinance, sell, or restructure within the fixed term and getting hit with a break cost that erases whatever they saved. If there’s any chance you’ll need flexibility in the next 1-3 years — a possible move, a business change, a sale — that risk needs to be weighed against the certainty you’re buying.

A Practical Way to Decide

Fix if:

• Your budget has little room to absorb another rate rise without real stress
• You’re confident you won’t need to break the loan in the fixed period
• You value knowing the exact number for the next 1-5 years more than you value flexibility

Stay variable if:

• Your budget can genuinely absorb a few more rate moves without changing your life
• You want to keep making extra repayments or use an offset account freely
• There’s a real chance you’ll need to refinance, sell, or restructure in the next few years

Split it if you can’t decide

Most lenders let you split a loan — say 50% fixed, 50% variable. It’s a genuine middle ground: certainty on part of your debt, flexibility on the rest. Worth asking about specifically if neither pure option feels right. Moneysmart notes that a split loan can be more complex, because different rates, fees and conditions may apply to each part; its fixed vs variable comparison also confirms that fixed loans may limit extra repayments and carry break fees.

Frequently Asked Questions

Is a fixed rate always higher than variable?

Not always, but it’s common, since the bank is pricing in the risk of holding that rate for you regardless of what happens to the cash rate. The gap changes constantly depending on market conditions.

Can I make extra repayments on a fixed loan?

Usually, but most lenders cap it (commonly around $10,000-$30,000 a year) before extra fees apply. Check your specific loan’s fixed-rate terms before assuming it works the same as a variable loan.

What happens if I need to break a fixed-rate loan early?

You may be charged a break cost, calculated on the lender’s cost of unwinding the fixed-rate arrangement. It can be a few hundred dollars or several thousand, depending on how much the rate environment has moved since you fixed and how much term is left.

The Bottom Line

Don’t try to out-guess the RBA — even the people whose job it is to forecast this got the last cycle wrong. Decide based on what your own budget can absorb and how much flexibility you actually need, not on which way you think the next announcement will go.

Related Reading

• What Actually Happens to Your Repayments When the RBA Moves — the mechanics behind this decision
• Why Rates Rose When Everyone Expected Cuts (And What Borrowers Should Do Now) — the cycle that’s made this question urgent
• Should You Refinance? The Simple Maths That Actually Answers It — relevant if you’re already fixed and reconsidering

More on this topic is collected in the Finance Strategies for Australians hub.

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Written by Michael Wignall, Lending Area Manager with 30+ years in banking and home lending across the ACT, Illawarra, and Riverina. Got a question or an idea for a post? Get in touch.