Everyone wants the same thing: to pick fixed right before rates rise, or variable right before they fall. Nobody can reliably do that — not the banks, not the economists, not me. So the smart way to choose isn't to guess the future; it's to match the loan to your life. Here's the framework I use with clients.

What each one actually does

Variable

Your rate moves up and down over time. The upside is flexibility: usually unlimited extra repayments, a full offset account, and freedom to refinance without big break costs. The trade-off is uncertainty — repayments can rise.

Fixed

Your rate is locked for a set term (often 1–5 years). The upside is certainty: your repayment won't change for that period. The trade-offs are real, though — limited extra repayments, often no (or limited) offset, and potentially significant break costs if you exit early (by refinancing, selling, or paying out the loan).

Split

Part fixed, part variable. You get some certainty and some flexibility. For a lot of people this "have a bit of both" approach is the quiet sweet spot.

The questions that actually decide it

  • Do you value certainty or flexibility more? If a rise of a few hundred dollars a month would genuinely stress your budget, certainty has real value. If you want to smash the loan down fast, flexibility wins.
  • Are you planning to move or sell soon? Fixing then breaking early can be expensive. If your situation might change, variable (or a small fixed portion) is usually safer.
  • Do you want an offset account? If you keep savings you'd like working against your loan, that points toward variable — or a split.
  • Will you make big extra repayments? Fixed loans usually cap these; variable doesn't.
Notice that none of those questions is "where are rates going?" That's deliberate. You can't control rates — but you can control how well your loan fits your life.
Rule of thumb: choose variable for flexibility and offset, fixed for budgeting certainty (and only if you're confident you won't break it early), and split when you want a foot in both camps.

One more thing: the rate isn't the whole cost

Fees, offset benefits, redraw, and how easily you can refinance later all matter. A slightly higher rate with a genuine offset can beat a lower "headline" rate for the right person. Run your real numbers with our mortgage calculator, then sense-check the structure with someone who can see the whole picture.