Don't bet the whole loan on one rate call. Split it.
A split loan divides your balance into two portions under one mortgage — one on a fixed rate for repayment certainty, the other variable to keep offset, redraw and unlimited extra repayments. It's a hedge: if rates rise, the fixed slice is shielded; if they fall, the variable slice benefits. You don't have to be right about which way rates go.
The shock absorber: one loan, two jobs.
Picture your loan as a single bar you can slide. Push it toward fixed for certainty; toward variable for flexibility and offset. Then watch what happens to your repayment when the cash rate rises — the fixed portion stays put, so only part of your balance feels the move.
Slide the mix to suit you — 50/50, 60/40, 70/30, it's your call. The fixed slice locks a rate for a set term (typically 1–5 years); the variable slice keeps offset, redraw and unlimited extra repayments. Illustration only.
Illustrative worked example only, not a quote or an offer of credit. Assumes a $600,000 loan over 30 years and a one-off +1.00 percentage-point rise applied to the variable portion; figures rounded. Actual repayment changes depend on your rate, balance, term and lender. Rates move with the RBA cash rate, currently 4.35% (held June 2026); the average rate on new owner-occupier variable loans was around 6.22% (RBA, May 2026) — indicative only.
Three things that make splitting different.
One loan, divided in two
You split the balance into two portions — 50/50 or any ratio — with one fixed and one variable, under a single mortgage over the same property. You apply once; the lender assesses the total lending.
Certainty on one side, features on the other
The fixed portion gives a locked repayment on part of the debt. The variable portion keeps the full toolkit: offset, redraw and unlimited extra repayments — which usually attach to the variable slice only.
Break costs are contained
If you exit early — sell, refinance or repay a lump sum — break costs apply only to the fixed portion, never the whole loan. Splitting reduces (it doesn't remove) your break-cost exposure.
A split softens the blow — in both directions.
When the cash rate goes up, only the variable portion's repayment increases — the fixed portion stays exactly where it is for the rest of its term. So your total repayment moves less than a fully-variable loan. That's the whole point of the hedge. The RBA lifted the cash rate by 0.75 percentage points across 2026 to reach 4.35%, so variable borrowers have just felt a step-up — a fixed slice would have shielded part of it.
If rates rise
Only the variable slice re-prices. The fixed slice is insulated until its term ends, so your repayment rises by less than it would on a fully-variable loan.
If rates fall
You benefit on the variable slice, where repayments ease and offset keeps working. The fixed slice can't follow rates down until it rolls off — that's the trade-off you accept for the certainty.
A split is explicitly a "don't put all your eggs in one basket" hedge against getting the rate call wrong — not a way to beat the market. Cash rate 4.35% (RBA, held June 2026); rates move with the cash rate. General information only, not personal advice.
There's no magic number — it follows your budget.
Weight toward fixed if a rate rise would genuinely strain your budget; weight toward variable if you hold healthy savings for an offset or plan large extra repayments. Common starting points:
The classic hedge
Half your loan is protected from rises; half can benefit from falls and carries the offset. Whatever rates do, you're half right — and the regret in either direction is limited. A sensible default for first-time splitters.
Certainty first
Most of your repayment is locked in. The smaller variable slice still gives your offset a home and leaves room for extra repayments — without exposing much of the balance to rate moves. Suits tighter budgets.
Flexibility first
Maximum flexibility with a modest safety net. A useful rule of thumb: keep the variable portion at least as large as your realistic offset balance plus planned extra repayments, so no feature goes to waste.
Break costs apply to the fixed portion only
If you refinance, sell or repay during the fixed term, the lender may charge a break cost on the fixed slice. It isn't a fixed fee — it's driven by wholesale swap-rate movements since you fixed, so it can be near zero if rates have risen, or substantial if they've fallen. Your lender must quote it, and the quote is typically valid only for a day or two.
The quiet advantage of a split is containment: the variable portion can generally be repaid at any time without a break cost (standard discharge fees may apply). The smaller your fixed slice, the smaller your maximum break-cost exposure — that's the trade-off against rate protection.
Break-cost figures are set by your lender at the time and depend on market rates — ask for an estimate before you fix. General information only, not personal advice.
Split loans, answered straight.
What is a split home loan?
A split loan is a single home loan divided into two or more portions, each with its own rate type — most commonly one portion fixed and one variable. Each portion has its own repayment and its own rules, but they sit under the one mortgage over your property. It's a structure choice, not a separate product.
How do I choose my split ratio?
Start with your budget and savings. Weight the loan toward fixed if a rate rise would genuinely strain your budget; weight it toward variable if you hold healthy savings for an offset or plan large extra repayments. Common starting points are 50/50 and 60/40, but the right ratio follows your circumstances, not a rule of thumb.
Does a split loan actually soften rate rises?
Yes — when the cash rate rises, only the variable portion's repayment increases, while the fixed portion stays put for the rest of its term. So your total repayment moves less than it would on a fully-variable loan. The trade-off is that if rates fall, you only benefit on the variable portion. It's a hedge, not a way to beat the market.
Does an offset account work on a split loan?
Typically the offset attaches to the variable portion only — most lenders don't offer offset on fixed portions, or offer only partial offset. Your savings still work for you; they just work against the variable side. This matters when choosing your ratio: an offset only helps up to the size of the variable portion.
What happens if I sell or refinance during the fixed term?
Break costs may apply — but only on the fixed portion. The variable portion can generally be repaid at any time without penalty (standard discharge fees may apply). This containment is one of the advantages of splitting: your maximum break-cost exposure is limited to the fixed slice of the loan.
Can I make extra repayments on a split loan?
Yes — on the variable portion, extra repayments are generally unlimited and penalty-free. The fixed portion usually has an annual cap on extra repayments, and exceeding it can trigger fees or break costs. Many borrowers size the variable portion to match their realistic repayment capacity for exactly this reason.
What happens when the fixed portion expires?
Unless you act, the fixed portion typically reverts to the lender's standard variable rate, which is often higher than competitive market pricing. Before expiry you can re-fix that portion, convert it to variable, change your split ratio entirely, or refinance the whole loan. It's worth reviewing options three to six months out.
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