Where Rates Actually Sit Right Now
I went through the latest rate sheets from our 83-lender panel this week, and the picture has shifted significantly from even six months ago. The RBA raised the cash rate to 3.85% in February 2026, and lenders moved quickly - most passed on the full 0.25% increase within days.
Here's what I'm seeing across the market right now:
- Best variable rates start from around 5.49% (non-bank lenders with fewer features) up to 5.99% with the major banks
- 1-year fixed rates range from about 5.49% to 5.89%
- 2-year fixed rates sit between 5.59% and 5.79%
- 3-year fixed rates range from 5.49% to 5.69%
What's interesting - and this is something I always point out to clients - is that fixed rates are actually lower than variable rates right now for some terms. Two-year fixed rates are averaging about 0.55% below variable rates across the market. That's unusual. It tells you the market is pricing in the expectation that rates will come down eventually, even though the RBA just hiked.
When I pulled the latest ABS Lending Indicators, I noticed that fixed rate loans now make up about 35% of new lending - up from 15% back in 2022 when everyone was scrambling to lock in at the bottom. Borrowers are starting to hedge their bets again.
How Variable Rate Loans Work
A variable rate moves with the market. When the RBA changes the cash rate, your lender typically adjusts your rate within a few weeks. Sometimes they pass on the full change, sometimes only part of it - and occasionally they move rates independently of the RBA altogether.
The advantages I see in practice
Offset accounts. This is the biggest one. A variable loan with an offset account lets you park your savings against your mortgage balance. If you owe $600,000 and have $40,000 in your offset, you only pay interest on $560,000. At 5.69%, that $40,000 offset saves you roughly $2,276 per year in interest. I've had clients save tens of thousands over their loan life just from disciplined offset use.
Extra repayments with no penalties. You can throw as much extra money at a variable loan as you want. Got a bonus? Tax refund? Inheritance? Straight onto the mortgage. Most fixed rate loans cap extra repayments at $10,000-$20,000 per year.
No break costs. If you need to sell your property, refinance, or make changes to your loan, there are no penalties. With a fixed rate, break costs can run into tens of thousands of dollars - I've seen break fees of $25,000 on a $700,000 loan when rates moved against the borrower.
Redraw facility. Most variable loans let you redraw any extra repayments you've made. It's not as tax-effective as an offset for investment properties, but for owner-occupiers it provides a safety net.
The downside
Your repayments change when rates move. After the February 2026 hike, a borrower with $600,000 at 5.69% is now paying about $3,730 per month. If NAB's forecast of another hike to 4.10% by May materialises, that could push rates to around 5.94%, adding another $95 per month. Over a year, that uncertainty adds up.
How Fixed Rate Loans Work
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A fixed rate locks your interest rate for a set period - typically 1, 2, 3, or 5 years. Your repayments stay exactly the same regardless of what the RBA does during that period.
When I recommend fixing
You're on a tight budget with no room for rate rises. If a $100-$200 monthly increase would cause genuine stress, fixing removes that risk entirely. I had a young couple - first home buyers - last year whose combined income left them with about $400 per month buffer after their mortgage. I told them straight: fix at least 70% of your loan, because one more rate hike would put you under pressure.
You believe rates will rise further. The RBA's February 2026 Statement on Monetary Policy flagged that trimmed mean inflation is still 3.2% - above their 2-3% target band. They specifically mentioned that "inflation is likely to remain above target for some time." If the RBA hikes again, fixed rate borrowers won't feel it until their fixed term expires.
You want certainty for financial planning. If you're budgeting for a renovation, starting a family, or one partner is taking parental leave, knowing your exact mortgage repayment for the next 2-3 years has real value.
The trade-offs
Limited extra repayments. Most lenders cap additional repayments at $10,000-$20,000 per year during the fixed period. If you come into money, you can't aggressively pay down the loan.
No offset account (usually). Some lenders offer offset on fixed loans, but most don't. CBA is one of the few that offers a partial offset on their fixed rate products.
Break costs. This is the big one. If you need to break your fixed rate early - to sell, refinance, or switch - the lender calculates a break cost based on the difference between your rate and current wholesale rates. When I was on the lender side, I processed break costs ranging from $500 to over $30,000. The calculation is complex and always favours the lender.
You might miss out on rate cuts. If the RBA cuts rates during your fixed period, you're locked in at the higher rate. This is exactly what happened to borrowers who fixed at 6%+ in 2023 - rates have since come down for variable borrowers while they're stuck paying more.
The Real Cost Comparison: Fixed vs Variable in 2026
I ran the numbers using current rates from our panel. Here's what each option actually costs on a $600,000 owner-occupier loan over different time horizons.
Scenario 1: Rates stay where they are
| Option | Rate | Monthly Repayment | Total Paid Over 3 Years |
|---|---|---|---|
| Variable (best available) | 5.49% | $3,397 | $122,292 |
| Variable (big bank) | 5.99% | $3,596 | $129,456 |
| 2-year fixed | 5.59% | $3,437 | $123,732 |
| 3-year fixed | 5.49% | $3,397 | $122,292 |
Scenario 2: One more RBA hike of 0.25%
| Option | Rate After Hike | Monthly Repayment | Total Paid Over 3 Years |
|---|---|---|---|
| Variable (best) | 5.74% | $3,497 | ~$125,900 |
| Variable (big bank) | 6.24% | $3,697 | ~$133,100 |
| 2-year fixed | 5.59% (no change) | $3,437 | $123,732 |
| 3-year fixed | 5.49% (no change) | $3,397 | $122,292 |
Scenario 3: Two rate cuts of 0.25% each over 18 months
| Option | Rate After Cuts | Monthly Repayment | Total Paid Over 3 Years |
|---|---|---|---|
| Variable (best) | 4.99% | $3,199 | ~$118,400 |
| Variable (big bank) | 5.49% | $3,397 | ~$125,500 |
| 2-year fixed (then variable) | 5.59% then 4.99% | $3,437 then $3,199 | ~$120,200 |
| 3-year fixed | 5.49% (no change) | $3,397 | $122,292 |
The Split Loan Strategy (What Most of My Clients Actually Do)
Here's what I recommend to the majority of my clients, and it's what I'd do myself: split the loan.
A split loan divides your mortgage into two portions - one fixed, one variable. You get the certainty of fixed repayments on part of your loan, plus the flexibility and offset benefit on the rest.
How I typically structure it
- 60% variable with offset - This is where you park your savings. The offset benefit plus the ability to make unlimited extra repayments gives you flexibility and saves real money.
- 40% fixed for 2-3 years - This portion gives you a floor. No matter what the RBA does, you know exactly what 40% of your repayment will be.
On a $600,000 loan, that looks like:
- $360,000 variable at 5.69% = $2,089/month
- $240,000 fixed 2 years at 5.59% = $1,375/month
- Total: $3,464/month
If you have $40,000 in your offset account against the variable portion, you're effectively paying interest on $320,000 variable - which drops that portion to $1,856/month and your total to $3,231/month.
Every major lender and most non-bank lenders on our panel offer split loans. It's not an exotic product - it's the standard way smart borrowers manage interest rate risk.
Current Lender Rates: Fixed vs Variable Compared
I pulled these from our panel this week to give you a direct comparison across lenders.
| Lender | Variable From | 1yr Fixed From | 2yr Fixed From | 3yr Fixed From | Offset on Variable |
|---|---|---|---|---|---|
| CBA | 5.99% | 5.79% | 5.59% | 5.49% | Yes |
| Westpac | 5.99% | 5.89% | 5.69% | 5.59% | Yes |
| NAB | 5.99% | 5.79% | 5.59% | 5.49% | Yes |
| ANZ | 5.94% | 5.69% | 5.59% | 5.49% | Yes |
| Macquarie | 5.75% | 5.59% | 5.49% | 5.39% | Yes |
| ING | 5.69% | 5.59% | 5.49% | 5.39% | Yes (variable only) |
| Athena | 5.49% | N/A | N/A | N/A | No |
| Bankwest | 5.79% | 5.69% | 5.59% | 5.49% | Yes |
Rates are indicative, based on owner-occupier P&I loans at max 80% LVR. Subject to change. February 2026.
A few things jump out when I look at this table. Macquarie and ING offer the best combination of competitive rates across both fixed and variable, plus offset accounts. Athena wins on variable rate alone but doesn't offer fixed rates or offset - so it's only suitable if you're committed to staying fully variable. The big four banks are consistently the most expensive, though they sometimes offer cashback deals that partly offset the rate gap.
The Mortgage Cliff: What Happened to Borrowers Who Fixed in 2021-2022
This is relevant context for anyone deciding between fixed and variable right now. During COVID, the RBA dropped the cash rate to 0.10% and lenders offered fixed rates below 2%. Hundreds of thousands of Australians locked in at rates between 1.89% and 2.50%.
Those fixed terms have now largely expired. The RBA's own analysis found that around 14% of those fixed-rate borrowers faced mortgage payment increases of more than 60% when they rolled off. On a $500,000 loan, going from 2.00% to 5.99% means your monthly repayment jumps from $2,121 to $3,596 - an extra $1,475 per month.
I helped dozens of these borrowers through the transition. The ones who planned ahead - building savings, cutting expenses before their fixed term ended, or refinancing early to lock in a lower variable rate - managed the shift without major stress. The ones who ignored the expiry date got a nasty surprise.
If you're currently on a fixed rate, check when it expires. Most lenders will roll you onto their standard variable rate - which is almost always their most expensive product. That's a refinancing opportunity, not a fait accompli.
How to Decide: My Framework for Clients
After 11 years of having this conversation with borrowers, I've developed a simple framework. Answer these three questions:
1. Can you absorb a $200-$300/month increase without stress? If yes, variable gives you better long-term flexibility. If no, fix at least a portion.
2. Do you have significant savings to put in an offset? If you have $30,000+ sitting in savings, a variable loan with offset will save you more than the rate difference between fixed and variable. The offset benefit compounds over time.
3. Are you planning to sell or make major changes within 3 years? If yes, stay variable. Break costs on fixed loans can cost you thousands if you need to sell or refinance before the fixed term ends.
Most people end up somewhere in the middle - which is why the split loan is my default recommendation. It's not fence-sitting; it's risk management.
Frequently Asked Questions
Can I switch from fixed to variable during my fixed term?
Technically yes, but your lender will charge break costs. These are calculated based on the difference between your fixed rate and the current wholesale rate for the remaining term. I always recommend getting a break cost quote from your lender before making any decisions - it's free to ask and the number might surprise you in either direction.
What happens when my fixed rate expires?
Your lender will roll you onto their standard variable rate unless you take action. This is usually one of their most expensive rates. About 4-6 weeks before expiry, contact your lender to negotiate a discounted variable rate, or talk to a broker about refinancing to a better deal. Don't let it roll over passively - that's where banks make their margin.
Is a 5-year fixed rate ever a good idea?
Rarely, in my experience. You're locked in for a very long time, and life changes - jobs, relationships, kids, relocations. Five-year break costs can be enormous. The only scenario where I'd consider it is if the 5-year rate is significantly below variable and you're absolutely certain you won't need to make changes. In the current market, 5-year fixed rates don't offer enough discount to justify the rigidity.
Do all lenders offer split loans?
Most do, but the mechanics vary. Some lenders let you split into as many portions as you like; others limit you to two. Some charge a separate fee for each loan split. The major banks, Macquarie, ING, and Bankwest all offer straightforward split loan products. Check our comparison of home loan options for specifics.
How does the offset account work on a split loan?
The offset account only applies to the variable portion of your split. So if you split $600,000 into $360,000 variable and $240,000 fixed, your offset savings only reduce interest on the $360,000 variable balance. This is why I recommend putting the larger portion on variable if you have significant savings - it maximises your offset benefit.
Should I fix if I think rates will go up?
If you're genuinely concerned about rate rises, fixing part of your loan is a reasonable hedge. But remember - fixed rates already have rate rise expectations baked into them. When I checked the RBA's February 2026 outlook, they indicated inflation should return to the mid-point of their target by mid-2028. That suggests the hiking cycle is close to its peak. Fixing for 2 years could mean you're locked in above where variable rates settle - or it could save you if another hike comes. Nobody knows for certain, which is exactly why splitting is the safer strategy.
Making Your Choice
The fixed vs variable decision isn't about predicting where rates will go - even the RBA gets that wrong. It's about understanding your own financial situation, your tolerance for repayment changes, and whether features like offset accounts are worth more to you than rate certainty.
I went through the ABS data, the RBA statements, and our own lender panel rates for this article. The numbers point clearly to one thing: the right answer is different for every borrower. What's universal is that most Australians are paying more than they should - regardless of whether they're on fixed or variable.
If you want help running the numbers for your specific situation, book a free consultation with us. We'll model fixed, variable, and split scenarios using your actual loan balance and show you exactly what each option costs. It takes 15 minutes and might save you thousands.
