In 2026, the RBA is widely expected to cut rates further. That changes the fixed vs variable calculus significantly — and means the choice you make in the next few months could save or cost you tens of thousands of dollars over the next five years.
~6.2%
Best variable (Apr 2026)
~6.0%
Best 2yr fixed (Apr 2026)
Split
Most popular choice
Free
Rate comparison
What Fixed and Variable Actually Mean
Fixed rate: Your interest rate is locked for a set period — typically 1, 2, 3, or 5 years. Your repayments stay the same for that term regardless of what the RBA does. When the fixed term expires, you roll onto the lender's variable rate (usually higher than current market rates unless you proactively review).
Variable rate: Your rate moves with the market. When the RBA cuts, your repayments eventually drop. When the RBA raises, they go up. Variable loans offer more flexibility — offset accounts, unlimited extra repayments, and the ability to refinance without break costs.
The 2026 Rate Outlook
The RBA began its cutting cycle in early 2025 and further cuts are priced into bond markets for 2026. This has two important implications for the fixed vs variable decision:
- Variable rates are expected to fall further. Fixing now means locking in at current rates and potentially missing further cuts. The market is pricing 2–4 more 0.25% cuts in 2026
- Short fixed rates already price in cuts. 1–2 year fixed rates from lenders already reflect market expectations. This is why short fixed rates are often lower than longer terms — the market expects variable to fall
The practical implication: fixing for 5 years right now means betting that variable rates will average higher than today's fixed rate for the next 5 years. In a cutting environment, that's a difficult bet to win.
The Head-to-Head Comparison
✓ Pros
- Offset account available
- Unlimited extra repayments
- Refinance anytime, no break costs
- Benefits from future rate cuts
✗ Cons
- Repayments can rise
- Budgeting harder with fluctuating rate
- Currently slightly higher than best fixed
✓ Pros
- Repayment certainty
- Currently competitive short-term rates
- Good for tight budgets
✗ Cons
- Break costs if you sell or refinance
- Extra repayments capped ($10–20k/yr)
- No offset account (most lenders)
- Miss future rate cuts
Free Rate Analysis
See what rates are available for your profile today
We compare fixed and variable rates across wide lender panel and show you which structure saves the most money for your situation — no credit check, no obligation.
Compare Fixed vs Variable →Get your personalised rate comparison
Tell us about your loan and we'll show you the best fixed and variable options for your profile — and which structure makes the most financial sense in 2026.
What Happens When Your Fixed Rate Expires
This is the most important scenario in 2026. Hundreds of thousands of Australian borrowers who fixed in 2020–2022 at historically low rates are rolling off onto variable rates that are 2–3% higher. If this is you:
- Don't wait for rollover to happen. Contact your broker 90–120 days before expiry. By then you'll have had time to research and lodge an application if switching
- Get a loyalty rate review from your current lender first. Ask them what rate they'll offer you post-rollover. Compare this against what a new lender will offer for a refinance
- Understand the rate comparison trap. Your lender's post-rollover variable rate is often much higher than their rate for new customers. This gap is your negotiating leverage
- Factor in break-even for switching. Use our refinance calculator to confirm that switch costs are recovered within a reasonable timeframe
Who Should Fix Right Now
Despite the general advice to stay variable in a cutting environment, fixing makes sense for specific profiles:
- Borrowers at maximum serviceability. If your repayments at the current rate are stretching your budget, fixing provides certainty that a potential RBA hold (or shock rise) won't push you into difficulty
- Buyers who need to budget precisely. First home buyers or upgraders who have carefully modelled their finances with a specific repayment in mind benefit from the certainty of fixing for 1–2 years while they settle in
- Borrowers unlikely to refinance or sell for 2+ years. If you're confident you'll hold the property and the loan for the fixed period, break cost risk is eliminated
Frequently Asked Questions
Most economists expect further RBA cuts in 2026, which flow through to variable rates. For most borrowers, staying variable (or using a split loan) is the more flexible and likely cheaper option in 2026. But if certainty is your priority, a short 1–2yr fixed can lock in today's competitive short-term rates.
You roll onto the lender's standard variable rate — which is typically much higher than what you'd get as a new customer. Review your loan 90–120 days before expiry: either get your current lender to match the market, or refinance to a more competitive option.
Most lenders allow up to $10,000–$20,000 in extra repayments per year on fixed loans. Exceeding this cap can trigger fees. Variable loans have no cap. If you plan to make significant extra repayments from bonuses or income windfalls, variable gives you more flexibility.
Break costs apply when you exit fixed early — by refinancing, selling, or exceeding the extra repayment cap. They're based on the difference between your fixed rate and current wholesale rates × balance × remaining term. In a falling rate environment, break costs can be substantial. Always get a written estimate before exiting.
A split divides your loan — part fixed for certainty, part variable for flexibility. No standard split ratio — your broker can structure it to match your cash flow needs and risk appetite. Popular in uncertain rate environments where you want some protection but don't want to miss potential rate cuts entirely.
Get a Personalised Rate Structure Recommendation
We'll assess your situation — budget, plans, risk preference — and recommend the right fixed/variable split for your specific circumstances. Free. No obligation.
Ready to talk to a broker?
Get a straight answer about your borrowing power — no credit check, no obligation. Our Sydney mortgage broker team is available Mon–Sat 9am–7pm.