Last reviewed: October 2026 · Updated after each RBA decision · By the MortgageCompass Editorial Team · How we research
Right now, fixed and variable home loans in Australia cost almost the same. On October 2, 2026, Canstar’s average owner-occupier variable rate was 6.63%, against 6.56% for a two-year fix and 6.61% for three years. That is unusual, and it changes the question. You are not choosing the cheaper rate; you are choosing between certainty and flexibility, at a time when the Reserve Bank of Australia has raised the cash rate four times this year, to 4.60%.
There is no single right answer, so this guide gives four, one for each of the borrowers we hear from most. Find the one closest to you, then use the split loan mixer to test your own numbers.
Today’s rates at a glance
| Loan type | Average | Lowest |
|---|---|---|
| Variable | 6.63% | 5.79% |
| 1-year fixed | 6.52% | 5.79% |
| 2-year fixed | 6.56% | 5.89% |
| 3-year fixed | 6.61% | 5.89% |
| 5-year fixed | 6.82% | 6.29% |
Owner-occupier principal and interest loans of $600,000 at 80% loan-to-value ratio (LVR), from Canstar on October 2, 2026. The lowest variable rate falls to 5.69% at some LVRs. Compare current offers in the best mortgage rates in Australia.
Four borrowers, four answers
Try your own split
Most Australian lenders let you split one loan into a fixed and a variable part, in whatever proportion you choose. Move the slider to see how your mix behaves if the RBA cuts, holds or keeps raising rates over the next three years.
Split loan mixer
Drag the slider to decide how much of your loan to fix for three years. See the repayment today and the interest you would pay over those three years if the RBA cuts, holds or keeps raising rates.
| 3-year interest | Cuts | Holds | Rises |
|---|
30-year principal and interest loan, monthly repayments. Scenarios over three years: cuts of 0.25 points in months 4 and 10; no change; or rises of 0.25 points in months 2, 5 and 9. Lenders pass changes on in full here; in reality they may not. The offset balance is linked to the variable part only, as most fixed loans do not allow a full offset. Default rates are Canstar averages for October 2, 2026. Not financial advice.
With the default figures and $20,000 in offset, an all-variable loan costs less than fixing if rates hold or fall, but about $7,000 more over three years if the RBA raises the cash rate three more times. A 50/50 split cuts that swing roughly in half. The right balance depends on how much a bad outcome would hurt your budget, not on guessing the next decision.
What else to check before you choose
- Extra repayments: variable loans usually allow unlimited extra repayments. Fixed loans often cap them, commonly around $10,000 a year, and may charge for more.
- Redraw and offset: usually full on variable loans, limited or unavailable on many fixed loans.
- Break costs: leaving a fixed loan early can be expensive, especially after rates fall. Ask the lender how it calculates them.
- Rate lock: fixed rates can change between applying and settling. A rate lock, often costing a few hundred dollars, secures the rate for a set period.
- The revert rate: when a fixed term ends, the loan usually rolls onto the lender’s standard variable rate, which may be well above its best offers. Put the date in your calendar.
Where rates might go next
The RBA lifted the cash rate by 0.25 points to 4.60% on September 29, 2026, its fourth increase this year, citing core inflation stuck at 3.6% and higher fuel prices. The September quarter inflation figures are due on October 28 and the next decision on November 3. Fixed rates already reflect what markets expect; if you fix, you are betting that rates will rise by more than the market expects, and if you stay variable, that they will rise by less. Nobody knows which, which is why many borrowers split. Before you take on any loan, check how much you can comfortably borrow with our borrowing power calculator.
Sources
- Canstar: average home loan interest rates
- Reserve Bank of Australia: cash rate
- ASIC Moneysmart: home loans
This guide is for general information only and is not financial, credit or tax advice. It does not take into account your objectives, financial situation or needs. Rates change often; check the latest rates and the lender’s key facts sheet before you decide.