top of page

Variable or fixed? Finding your home loan rate in 2025

Finance Focus
The Reserve Bank of Australia (RBA) has cut the cash rate, and it seems likely there will be more cuts to come in 2025. All Big Four banks are anticipating at least two cuts this year and some say there may be up to five cash rate reductions.

So, should borrowers opt for a variable home loan rate or a fixed one? Or a bit of both with a split rate? The answer depends on what’s important to you.

Here, we explain your options.


Variable home loans


The benefit of a variable home loan is that the interest rate you pay will move up and down in line with market interest rates.


If the RBA cuts the cash rate again in 2025, your lender may pass on the reduction in your interest rate (though this is not 100% guaranteed), which will result in lower repayments. If the RBA puts the cash rate up, your interest rate could go up too.


Variable home loans tend to come with more flexibility and features than fixed rate loans. Examples include interest-saving features like redraw facilities and offset accounts.


You may also be able to make extra repayments without copping a fee, thereby paying off your home loan sooner.


Fixed home loans


With a fixed rate home loan, your interest rate will stay the same for the duration of the fixed period (usually from one to five years), irrespective of market interest rates.

The key benefit is that you’ll know exactly what your repayments will be and can budget accordingly.


If the RBA increases the cash rate, you won’t be affected, but you also won’t benefit if the cash rate goes down again.


In the past, fixed rate home loans were typically a lot less flexible than variable home loans. However, nowadays some lenders do allow you to make extra repayments (usually up to a limit) on fixed home loans. Certain lenders also offer redraw facilities or offset accounts on fixed-rate loans.


However, if you want to sell the property or refinance, you may be up for a break fee. While break fees are typically not charged on variable rate loans, you might face a discharge or settlement fee to cover admin costs, which usually range from $150 to $400. On fixed-rate loans, break fees can still be quite hefty, so it’s important to think through your long-term plans before committing.


If lenders expect the cash rate to fall, the fixed rate tends to be lower than the variable rate. Some lenders have already reduced their fixed-rate home loans in anticipation of future cash rate cuts by the RBA, so it’s worth exploring your options.


Split rate home loan


With a split rate home loan, you can lock in a portion of your mortgage under a fixed rate and leave the rest variable.


This gives you the best of both worlds. The fixed-rate portion provides certainty, so you’ll always know what your repayments will be for that part of the loan. Meanwhile, the variable portion of the loan offers flexibility and the potential to benefit from any interest rate cuts.


Like to explore your options further?


Deciding what type of loan is right for you can be challenging, but we’re here to help. We can crunch the numbers and help you to weigh up your options.


I have access to exclusive variable and fixed-rate loan options with competitive rates and features. Get in touch today.

 
 
 

댓글


NEWSLETTER SIGN UP

Keep up to date with Provident news

Thanks for subscribing!

CONTACT US

Thanks for submitting!

Your privacy is important to us and our Licensees - Akumin Financial Planning Pty Limited. You may request access to your personal information at any time by calling us on 08 9422 0000. Information collected will be subject to the individual Privacy Policies in the USEFUL LINKS below. You can also contact our Licensees, contact details available from us or in our Financial Services and Credit Guide/Financial Services Guides, if you do not wish to receive information about products, services or offers available from us from time to time.

FOLLOW US

  • Facebook
  • LinkedIn
Astrum 2024 _Client Value Prop_WNB.png

Paul Carter Pty Ltd ABN 16 079 780 895 and Provident South West Pty Ltd ABN 67 680 534 543, both trading as Provident Financial Services, is an authorised representatives and credit representatives of Akumin Financial Planning Pty Limited ABN 89 051 208 327, Australian Financial Services Licence 232706

@2024 Provident

This website contains information that is general nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decision based on this information.

Paul Carter Pty Ltd ABN 16 079 780 895 and Provident South West Pty Ltd ABN 67 680 534 543, both trading as Provident Financial Services, is an authorised representatives and credit representatives of 
Akumin Financial Planning Pty Limited ABN 89 051 208 327, Australian Financial Services Licence 232706


Website links have been provided with permission for information purposes only and will take you to external websites, which are not connected to us or our Licensees (AMP Financial Planning Pty Limited in any way. Note: We, Akumin Financial Planning Pty Limited do not endorse and are not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

bottom of page