With Rates on the Move in 2026, Should I Lock In a Fixed Rate or Stay Variable?
Choosing a fixed rate isn’t just about where interest rates may move. It’s a decision to trade flexibility for certainty. Whether that trade is worth making depends on your life, not just the RBA’s next call.
This is the question that gets asked at every rate cycle — and the honest answer is that predicting rate movements accurately enough to make this decision purely on economics is something even professional economists get wrong. The better framing is about what you need from the loan.
The Case for Fixing in a Rising Rate Environment
If rates are rising and lenders are pricing fixed rates above current variable rates, this may reflect market expectations about future interest rates. Fixing locks in the current rate — and if rates continue rising, your fixed repayments may appear comparatively lower. The risk is that rates plateau or fall and your fixed rate looks expensive.
The Case for Staying Variable
Variable rates give you flexibility: extra repayments, offset account access, the ability to refinance without break costs. In a period where rates are rising but uncertain, keeping options open has value.
What to Consider Before Deciding
- Are you likely to sell or refinance within the fixed period? Break costs can be substantial
- Do you make significant extra repayments? Fixed loans typically cap or restrict these
- Do you rely on an offset account? Most fixed loans don’t include one
- How much rate certainty do you genuinely need for your monthly budget?
The Split Loan Option
Many borrowers choose to split their loan between fixed and variable portions for stability, keeping the remainder variable for flexibility. This is a legitimate middle position — it limits the cost if you’re wrong in either direction.
You may wish to speak with a licensed mortgage broker to assess your personal circumstances.
This is general information only. Fixed and variable rate decisions depend on individual circumstances and market conditions. Speak with a licensed mortgage broker before acting. All loans are subject to lender approval.
Sources: RBA, Cash Rate Target 2026; ASIC MoneySmart, Fixed vs Variable Home Loans 2025; MFAA Industry Intelligence Service Report 2025.
