Should You Fix Your Home Loan in 2025?
With speculation about potential RBA rate cuts in 2025, many borrowers are wondering: Should I lock in a fixed rate or stick with variable? Surprisingly, some lenders are now offering fixed rates lower than variable rates, making this a critical financial decision.
This guide breaks down the key differences between fixed and variable loans, helping you choose the best option for your situation.
Variable-Rate Home Loans: Flexibility with Uncertainty
A variable-rate home loan fluctuates with the market, meaning your interest rate (and repayments) can rise or fall based on RBA cash rate changes.
✅ Pros of Variable Rates
✔ Potential savings if rates drop – You benefit immediately from RBA cuts.
✔ More features – Often include offset accounts, redraw facilities, and unlimited extra repayments.
✔ No break costs – You can refinance or sell without penalties.
❌ Cons of Variable Rates
✖ Unpredictable repayments – Budgeting is harder if rates rise.
✖ Higher costs in rising markets – If the RBA hikes rates, your repayments increase.
Best for: Borrowers who want flexibility, plan to make extra repayments, or believe rates will fall.
📌 Want to track RBA rate predictions? Check out RBA’s official statements.
Fixed-Rate Home Loans: Stability with Less Flexibility
A fixed-rate home loan locks in your interest rate for a set term (usually 1-5 years), protecting you from hikes but preventing savings if rates drop.
✅ Pros of Fixed Rates
✔ Rate certainty – Repayments stay the same, making budgeting easier.
✔ Potential savings if rates rise – You’re shielded from future RBA hikes.
✔ Some modern fixed loans offer features – Limited offset accounts or extra repayments.
❌ Cons of Fixed Rates
✖ No benefit from rate cuts – If the RBA lowers rates, you’re locked into a higher rate.
✖ Break costs apply – Exiting early (e.g., refinancing) can incur hefty fees (sometimes tens of thousands).
Best for: Borrowers who value repayment stability and expect rates to rise.
📌 Compare fixed rates: Finder’s Home Loan Comparison.
Current Trend: Fixed Rates Lower Than Variable?
In a surprising shift, some lenders are offering fixed rates below variable rates. For example:
🔹 Macquarie Bank: 2-year fixed at 5.69% vs. variable at 6.14%
🔹 Other major banks are also pricing in expected 2025 rate cuts into fixed deals.
Why Are Fixed Rates Lower?
Lenders anticipate multiple RBA cuts in 2025, so they’re offering lower fixed rates now to attract borrowers.
Key Question: Will fixing now save you money long-term?
If the RBA cuts more than expected, variable loans may win.
If inflation stays high and cuts are delayed, fixed loans could be smarter.
📌 For the latest rate forecasts, see Westpac’s Economic Insights.
Alternative Option: Split Rate Loans
Can’t decide? A split rate loan lets you:
Fix part of your loan (e.g., 50%) for repayment certainty.
Keep the rest variable to benefit from potential rate drops.
✅ Benefits of Split Loans
✔ Hedge against rate movements
✔ Access to some variable loan features
✔ Balance between security and flexibility
📌 Learn more about split loans: Canstar’s Guide.
Expert Tips for Choosing the Right Loan
1️⃣ Check your budget – Can you handle rising repayments if variable?
2️⃣ Compare fixed vs. variable rates – Some lenders offer lower fixed rates now.
3️⃣ Consider loan features – Do you need an offset account or extra repayments?
4️⃣ Think long-term – Will you refinance or sell soon? (Break fees hurt.)
5️⃣ Consult a mortgage broker – Get personalised advice before locking in.
Final Verdict: Fix or Stay Variable in 2025?
If you prioritize stability and expect rates to stay high, fixing could be wise.
If you want flexibility and believe rates will drop, variable may save you money.
Still unsure? A mortgage broker can help tailor a solution for your needs.
📌 For more insights, visit RateCity’s Home Loan Hub.