Fixed rate vs variable rate

A fixed-rate loan locks in your interest rate (and repayment) for a set term, typically 1, 2, 3, or 5 years. After the fixed period the loan reverts to a variable rate. Variable loans move with the lender's standard variable rate, which generally tracks the RBA cash rate (with the lender's own margin). Fixed gives certainty and protects against rate hikes; variable lets you ride rate cuts down, gives more flexibility on extra repayments, and usually has a full-feature offset. Break costs on fixed loans can run into thousands if you refinance, sell, or pay it off early. Many investors split their loan into a fixed portion plus a variable portion to hedge.