The Reserve Bank of Australia (RBA) has announced a 0.25% cut in the official cash rate, bringing mortgage rates into focus once again. For borrowers, the big question is: Should you lock in a fixed rate or stay on a variable loan?

With interest rates shifting, making the right decision can impact your financial stability and savings. Here’s a breakdown of the key factors to consider before choosing between fixed and variable rates.

Understanding the Current Rate Cut

The RBA’s decision to cut rates is typically aimed at stimulating economic growth, making borrowing cheaper for households and businesses. Lower rates can ease mortgage repayments for existing borrowers and encourage new lending activity.

However, lenders don’t always pass on the full rate cutand fixed rates are often priced based on future rate expectations rather than current conditions. That’s why it’s essential to consider both fixed and variable options carefully.

Pros & Cons: Fixed vs. Variable Rates

Fixed Rate Home Loans: Stability & Security

Pros:

• Predictable repayments – Protects you from future rate increases.
• Easier budgeting – Helps with financial planning, especially in uncertain times.
• Peace of mind – Ideal if you prefer stability in repayments.

Cons:

• Locked-in contract – You may miss out on future rate cuts.
• Break costs – Exiting early (e.g., selling, refinancing) can be expensive.
• Limited flexibility – Some fixed loans restrict extra repayments or offset accounts.

Fixed rates may suit you if:

• You want certainty over your mortgage repayments.
• You expect interest rates to rise again in the near future.
• You’re planning to stay in your home long-term.

Variable Rate Home Loans: Flexibility & Potential Savings

Pros:

• Lower rates when the RBA cuts – Your repayments decrease if lenders pass on rate cuts.
• Extra features – Offset accounts, redraw facilities, and extra repayments provide flexibility.
• Easier refinancing – No fixed-term break fees if you want to switch loans.

Cons:

• Risk of future rate hikes – If rates rise again, repayments will increase.
• Uncertainty in budgeting – Harder to plan long-term finances.

Variable rates may suit you if:

• You want the flexibility to refinance or make extra repayments.
• You believe rates will continue to fall.
• You have a financial buffer to manage possible rate increases.

What’s the Best Option for You?

There’s no one size fits all answer, but here are a few strategies to get the best of both worlds:

Split Loan Strategy

• Fix part of your loan and keep the rest variable.
• This allows you to benefit from both stability and potential savings from future rate cuts.

Consider Your Financial Goals

• If you prioritise certainty, fixing your rate could be ideal.
• If you value flexibility, a variable rate may work better.

Compare Lender Offers

• Banks and lenders often adjust their fixed and variable rates differently.
• Some may increase fixed rates ahead of expected rises, while others may lower them to attract new borrowers.

The RBA’s rate cut presents an opportunity for borrowers to review their mortgage strategy. If you're unsure about the best move, we can help tailor a plan to your needs.

Should you fix or stay variable? The decision ultimately depends on your risk appetite, financial goals and expectations of future rate movements.

Would you like a personalised home loan comparison? Reach out today to explore the best options available in this changing market!