Fixed vs variable home loans, in plain language

A fixed loan keeps the interest rate the same for a set period, often one to five years depending on the lender's offer. During that period your repayment usually stays the same, which makes budgeting easier. When the fixed period ends, the loan normally moves to a variable rate unless you fix it again.

A variable loan has a rate that can move up or down over time, following the lender's rate decisions and wider market conditions. Your repayment can therefore rise or fall. That flexibility can be useful if rates fall, but it also means you should budget for the possibility that repayments rise.

What to compare, beyond the headline rate

Compare the total cost over the time you expect to hold the loan, not just the first year's rate. Ask about fees, whether extra repayments are allowed during a fixed period and whether any break cost applies if you leave early, and whether an offset or redraw facility is included. A loan that looks cheaper in year one can cost more overall if fees or restrictions get in the way of extra repayments.

Can you split a loan?

Some borrowers split a loan into a fixed part and a variable part. That can soften the effect of a rate rise on part of the loan while keeping flexibility on the rest. It also adds complexity, so it is worth modelling both parts separately with this calculator — run the fixed part and the variable part as two separate calculations — and then asking a lender or broker to confirm the combined figure, including fees.

Estimates only, not financial advice. This calculator assumes a fixed rate for the whole term; a variable loan will not behave exactly like that. See the Disclaimer.

Try your own numbers in the home loan calculator — the result is an estimate, not financial advice.