Fixed vs variable home loan rates, explained. What’s the difference and which is better?

UNO home loans

Whether refinancing or taking out a home loan for the first time, acquiring a competitive rate could save you thousands of dollars. But should you go fixed, variable, or even a combination of the two?

Fixed vs variable home loan rates, explained. What’s the difference and which is better?

Whether refinancing or taking out a home loan for the first time, a competitive rate could save you thousands of dollars. But should you go fixed, variable, or even a combination of the two?

Australians are refinancing at record rates amid recent RBA interest rate increases. The value of owner-occupier refinancing between lenders rose to a record 9.1% in November 2022, according to the Australian Bureau of Statistics (ABS).

The average variable rate in December 2022 was 5.45% while fixed rates were 5.81%, according to Mozo.

That’s a difference of about $115 a month or $40,500 across a 30-year $500,000 mortgage. So, choosing the right interest rate on your loan is worthwhile.

What’s the difference between fixed and variable home loans?

Fixed and variable refer to the two major types of home loan rates on the market in Australia.

The difference between the two comes down to the interest rate.

With a fixed rate, the interest rate remains set in place of ‘fixed’ for a specified period.

For a variable rate, the interest rate can fluctuate, going up or down depending on broader interest rates and your lender.

You can also combine the two into a split rate home loan, potentially allowing you to take advantage of the features of both.

A split rate divides your loan into multiple parts which are financed at both fixed and variable rates. They offer a combination of mortgage features.

How does a fixed rate home loan work?

A fixed rate home loan is one in which the interest rate you pay is locked in place or ‘fixed’ for a set period.

This period varies but is typically between one and five years.

When you take out a fixed rate, you are guaranteed that the interest rate you pay month to month will remain the same and will not fluctuate.

At the end of a fixed term, you can choose to either move into a variable rate home loan, or refinance to either a split rate home loan or another fixed rate home loan.

You can typically break out of a fixed rate home loan early if you wish, although it is likely your bank or lender will charge you a fee.

What are the pros and cons of a fixed rate mortgage?

Benefits of fixed interest rate

Protection from rate rises - If interest rates go up, your repayments will remain consistent, protecting you from rate rises throughout your fixed term.
Certainty in your repayments - Knowing how much your mortgage will cost you each month can give you the ability and peace of mind to budget for other expenses.
Potential to save on fees and charges - Variable home loans come with various extras, but these can be expensive, so if you’re happy without them, you can avoid some fees with a fixed rate.

Potential drawbacks fixing your interest rate

Lack of features - The features of a variable rate home loan can be convenient. For instance, an offset account can be used to lower the balance of your home loan while accessing funds for everyday banking. Some fixed-rate loans do come with a redraw facility, but you need to check with your lender to see if this is available.
Potential to miss out on rate cuts - If interest rates fall, you will not get the benefit of this if you have locked in your rate.
Inability to make additional repayments - Variable home loans generally allow you to make additional repayments to pay off the balance faster, but one of the trade-offs for the certainty of a fixed rate is that you may not be able to do this.

Which one is for me?

Deciding between a fixed, variable, or split rate could save you thousands of dollars in repayments amid rising interest rates.

If interest rates are expected to rise, a fixed rate may be appealing as your interest rate could be less than the current cash rate. If they fall, though, a variable might be the way to go.

Choosing the ‘correct’ rate depends greatly on your circumstances, though. It helps to shop around to find the best rate.

Refinancing or taking out a new loan? UNO can help you compare from over 20 lenders to find the best deal today.

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H Fayyaz

April 10, 2026

We couldn’t be happier with the support Nick provided in helping us finalise both our car finance and business loan. He made the entire process seamless and took a lot of the pressure off us. Nick was thorough, proactive, and always one step ahead, ensuring everything was handled efficiently and without delays. He broke things down in a way that was easy to understand and made sure we were comfortable every step of the way. What really stood out was his dedication and commitment to getting things across the line smoothly. It’s rare to find someone who genuinely cares about the outcome as much as he does. Exceptional service from start to finish, highly recommended!!

Hassan Fayyaz

April 10, 2026

We had an outstanding experience working with Nick to settle both our car loans and business loan. From start to finish, he was professional, knowledgeable, and incredibly efficient. Nick took the time to understand our situation, explained everything clearly, and ensured the entire process was smooth and stress-free. His attention to detail and commitment to getting the best outcome for us really stood out. What we appreciated most was his responsiveness and genuine willingness to go above and beyond to make things happen. It’s not often you come across someone so reliable and easy to deal with. Highly recommend Nick to anyone looking for finance solutions, truly a 5-star service!

Joel Painter

April 8, 2026

Paul was an amazing broker to deal with. He went above and beyond to get the result we were all aiming for. Cant recommend enough.

Rebecca David

April 2, 2026

I can’t recommend my mortgage broker Jessica Southerwood and the UNO team highly enough. From start to finish, they made what felt like an overwhelming process so much easier for me. They took the time to truly understand my situation and worked tirelessly to refinance my Investment home loan and consolidate debts into a structure that actually works for me and my family. Not only did they secure us a great rate, but they also gave us clarity, confidence, and a clear path forward with our finances. Their communication was outstanding throughout and always available to answer questions and explain things in a way that made sense. Thanks to their expertise and dedication, I am now in a much stronger financial position and can focus on what matters most for our family. If you’re looking for someone who genuinely cares and delivers results, I wouldn’t hesitate to recommend Jess and the UNO team. Thanks again.

Laura

March 31, 2026

After owning my property for a few years undertaking substantial house renovations I found myself in a situation where I had run out of cash to finish due to rising building costs at the time. I wanted to refinance to free up equity from my home to ultimately finish my house renovations and give me an extra cash buffer. I honestly thought it would be out of reach for me and the sole home owner and was going to be pretty much impossible. However, Mike Parsons from Uno Home Loans found a way to make it happen. He was incredibly thorough and really took the time to explore every option instead of just going with the obvious ones, which made a huge difference to me in the end. Not only that, he also kept me in the loop the whole way through— always checking in, explaining things clearly, what the next steps would and generally made the whole process feel way less stressful than I expected. Thanks to Mike, I was able to free up equity when I didn’t think it was on the cards at all. This has since allowed me to complete some more home improvements which is not only a great feeling but has added more value to my home and my living situation in general. On top of that it has also provided me the extra comfort of having additional cash to support rising monthly living costs. If you want someone who genuinely cares and will go the extra mile to get you a result, then Mike Parsons is your man! I cannot recommend him enough!

Bryan Custodio

March 30, 2026

Complex self-employed deal done incredibly fast. I’m a commercial finance broker myself and have dealt with a lot of brokers. Scott is easily the best I’ve come across. My situation involved multiple businesses and low documentation, which is usually where things get messy, slow, and dragged out. Scott handled it seamlessly. He knew exactly how to structure everything from the start and was clear on what would be needed at each stage, which meant no unnecessary back and forth with the lender. The whole process was smooth, efficient, and far quicker than I expected given the complexity. If you’re self-employed and want someone who actually understands how to get these deals approved without the usual headaches, I’d strongly recommend reaching out to him.

Mirinda Smith

March 23, 2026

Nathalie Pelissier is fantastic! Her attention to detail, prompt communication and advocacy has blown me away. Very happy I found her and am in good hands. Thank you!

Kylie McCarthy

March 20, 2026

I have no words for how incredible Nathalie was. She kept me updated every step of the way and worked as hard as anyone could to get me the loan required for my settlement even though my financial record wasn't great. She got the loan sorted incredibly fast, and to be honest, is an absolute angel. I would recommend her hands down to absolutely everyone.

Georgina Brooks

March 19, 2026

I wish the 5 star rating was out of 100 because I would’ve given it 100/100 star rating. My husband and I have been clients of Jess for a good 3 years now and Jess has been the absolute best to us. She is so reliable, patient, knowledgeable, approachable and beautiful - the list goes on! She exceeds expectations. She has been through the ups and downs and has helped navigate throughout the way. Most importantly as this is our first home, she has educated us on so much that happens in the buying market. I 10000000% recommend her to be your broker. She is like no other. So thank you Jess for everything you have done for Mitchell and I, you don’t realise how much we appreciate everything you have strived for us.

Jayne Calam

March 4, 2026

I honestly couldn’t recommend Jake de Ruyter more highly! From start to finish, he was absolutely amazing. He made the entire process smooth, stress-free, and easy to understand. His communication was excellent, he was incredibly quick to respond to emails, phone calls, and messages. No matter what we asked, he got back to us straight away and explained everything clearly, which made the whole process feel so much less stressful. Thank you for such an outstanding experience!

Anna Webb

February 26, 2026

Scott and his team has been absolutely wonderful to work with from start to finish. What could have been a very stressful experience was made so much easier thanks to Scott’s support and dedication. I truly appreciate all the hard work he has put in to help me secure the best outcome possible. I would highly recommend Uno Home Loans to anyone looking for reliable and knowledgeable financial assistance.

Michael

February 13, 2026

I contacted Uno on a whim about refinancing a small loan. Once I was in communication with Mike Parsons, I knew I was in safe hands. He was patient throughout the process and I appreciated his personalised, purposeful and professional service, especially the following up when it was required. Mike also comes highly recommended for his knowledge.

Fixed vs variable home loan rates, explained. What’s the difference and which is better?