“Neither is universally better. Fixed rates provide certainty, while variable rates offer flexibility. The choice depends on your income, obligations, and appetite for repayment variability.”
With three RBA rate rises in 2026 and at least one more anticipated in June, the fixed vs variable question is being asked at a genuinely difficult point in the cycle. Both options carry real trade-offs right now — not theoretical ones.
The case for variable in 2026
Variable rates remain more competitive than fixed rates for most lenders in mid-2026. You retain the ability to make unlimited extra repayments and use an offset account — both of which can meaningfully reduce your total interest. If rates stabilise or fall in 2027, variable borrowers capture that movement without penalty.
The case for fixed in 2026
Certainty has real value when rates are rising and budgets are tightening. Fixing now removes the monthly uncertainty of further hikes. For borrowers who have already absorbed three increases and are at or near their serviceability limit, removing the risk of further rises may justify the premium over variable rates.
What the numbers look like
At current pricing, fixing a 2-year rate means accepting a rate approximately 0.2–0.4% higher than variable in exchange for certainty on that portion of repayments. If rates rise 0.5% further over that period, fixing comes out ahead. If rates hold or fall, variable comes out ahead. Neither side of that comparison can be predicted with certainty.
The question most borrowers should actually ask
Instead of asking which is better, ask yourself which you are more prepared to be wrong about. If you fix and rates fall, you pay a premium. If you stay variable and rates rise, you absorb more increases. Your personal tolerance for these outcomes is what matters most.
→ You may wish to speak with a licensed mortgage broker to assess your personal circumstances. This is general information only. Individual circumstances vary and scheme details change regularly. Verify current eligibility, caps, and terms with official sources before making decisions. Speak with a licensed mortgage broker for advice tailored to your situation. All loans are subject to lender approval.
Sources: RBA Cash Rate Target, May 2026; APRA, Prudential Practice Guide APG 223 — Residential Mortgage Lending; ASIC MoneySmart, Fixed Rate Home Loans 2025.
