Choosing between a fixed and variable interest rate is one of the most consequential mortgage decisions a property investor makes. It affects your cash flow certainty, your ability to make extra repayments, and your total interest cost over the life of the loan. Understanding both structures clearly is essential before you commit.
What is a fixed interest rate?
A fixed rate mortgage locks in your interest rate for a set period — typically 1, 2, 3 or 5 years — regardless of what happens to the Reserve Bank of Australia (RBA) cash rate during that time. Your repayments are predictable and consistent. At the end of the fixed term, the loan typically rolls to the lender’s standard variable rate unless you re-fix.
What is a variable interest rate?
A variable rate mortgage moves up and down with the RBA cash rate and your lender’s own rate decisions. When the RBA cuts rates, your repayments typically fall. When the RBA raises rates, your repayments rise. Variable loans usually allow unlimited extra repayments and come with full offset account access.
Fixed vs variable: side by side comparison
| Factor | Fixed rate | Variable rate |
|---|---|---|
| Certainty | Repayments fixed for term | Repayments change with RBA |
| Extra repayments | Usually capped or penalised | Unlimited |
| Offset account | Rarely available | Standard feature |
| Break costs | Can be significant | No break costs |
| Rate risk | Protected if rates rise | Exposed if rates rise |
| Rate benefit | Locked out if rates fall | Benefits immediately if rates fall |
What is a split loan?
Many investors split their loan — fixing a portion (say 50% to 70%) for certainty on cash flow while keeping the remainder on variable to retain offset account access and the ability to make extra repayments. A split loan is often the most pragmatic structure for investors who want both certainty and flexibility.
Which is better in 2026?
In mid-2026, the RBA has been in a rate-cutting cycle following the peak of the 2022 to 2023 tightening cycle. Variable rates are falling gradually. Locking in a fixed rate now means you may miss the benefit of further cuts. Speak to your mortgage broker about the current fixed vs variable spread and whether the certainty premium of a fixed rate is worth it for your specific portfolio and cash flow needs. GeeVee recommends not making this decision without modelling the impact of a 1% rate cut scenario on your variable repayments.
Frequently Asked Questions
Can I switch from fixed to variable mid-term?
Yes, but break costs apply. Breaking a fixed rate loan early can cost thousands of dollars depending on how much rates have moved since you fixed. Always calculate the break cost before switching.
Does a fixed rate affect my borrowing capacity?
Lenders assess serviceability at a buffer rate (typically 3% above the current rate) regardless of whether you fix or float. However, the actual repayment used in some serviceability calculations may differ between fixed and variable products. Your broker can model both scenarios.
What happens at the end of a fixed term?
Your loan automatically rolls to the lender’s standard variable rate (which may be higher than the market). Set a calendar reminder 3 months before your fixed term expires to shop the market, re-fix at a competitive rate, or refinance to a better lender.
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