The pros and cons of fixed-rate mortgages in Australia

Choosing between a fixed and variable rate is not simply a prediction about where interest rates may move. It is also a decision about certainty, flexibility and the features you may need during the fixed period.

Potential advantages

• Repayment certainty: the interest rate and required repayments are generally fixed for the agreed period.
• Easier budgeting: predictable repayments can make household cash-flow planning simpler.
• Protection from rate increases: increases in variable rates will not affect the fixed portion during the fixed term.

Potential disadvantages

• Less benefit if variable rates fall during the fixed period.
• Break costs may apply if the loan is repaid, refinanced or changed before the fixed term ends.
• Some fixed loans restrict additional repayments, redraw, offset accounts or other flexible features.
• The loan normally reverts to a variable rate when the fixed term expires unless a new arrangement is made.

Questions worth asking

Consider how long you expect to keep the property and loan, whether you may sell or refinance, how important an offset account is, and how much flexibility you need for extra repayments. Some borrowers split a loan between fixed and variable portions, but that structure has its own trade-offs.

The right choice is personal

A suitable structure depends on your goals, cash flow and tolerance for changing repayments. Comparing the actual loan features and costs—not only the headline rate—helps make the decision more useful.