Should You Fix Your Home Loan Rate? The Complete Australian Guide (2026)

By Andrew Paterson

Every time the Reserve Bank meets, the same question lands in our inbox: should I fix my rate?

The short answer is that it depends on what you’re trying to achieve. But the longer answer is worth understanding, because the banks are already telling you what they think is going to happen. You just need to know where to look.

In this guide, you’ll learn how to:

• Read what the banks are signalling through their fixed rate pricing
• Compare current fixed vs variable rates across the big four (March 2026)
• Run three real-world scenarios to see which option comes out ahead
• Understand rate lock: what it costs and when it’s worth paying
• Build a strategy around your own circumstances, not a one-size-fits-all answer

Let’s get into it.

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Table of Contents

1. A Brief History of the Cash Rate (And Why It Matters)
2. The Bank Signal: How Fixed Rates Tell You What’s Coming
3. What the Rates Are Actually Saying Right Now
4. Running the Numbers: Three Scenarios
5. What is Rate Lock?
6. What Should You Actually Do?
7. FAQ
   

Prefer to watch? We ran a live webinar on this topic in March 2026. The full recording is below. Or keep reading for the written version.

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Chapter 1: A Brief History of the Cash Rate (And Why It Matters)

To understand fixed rates, you need to understand the environment they exist in. That starts with the Reserve Bank of Australia and the cash rate.

The RBA uses the official cash rate as its primary lever for controlling inflation. When prices are rising too fast, they lift the rate to slow spending down. When the economy needs a kick, they cut it to get things moving. Lenders then price their variable and fixed products off the back of that number.

Source: Reserve Bank of Australia (rba.gov.au)

The chart tells the story pretty clearly. From mid-2018 to early 2020, the cash rate sat steady at about 1.5%. Then the pandemic hit. The RBA cut aggressively, all the way down to 0.10% by November 2020, and held it there for two years.

That’s the era people still talk about. Lenders were offering fixed rates as low as 1.8% to 2%. Borrowers who locked in at those levels came out ahead. But those were extraordinary circumstances.

Then came the recovery. Australians emerged from lockdowns with money to spend, supply chains were stretched, and inflation ran hot. The RBA responded with the fastest hiking cycle in a generation. From May 2022, the cash rate climbed from 0.10% to 4.35% by November 2023. That’s 4.25 percentage points in roughly 18 months.

Anyone who had locked in a cheap fixed rate and came off it during that period faced a significant jump in repayments. That’s what people mean when they talk about the “mortgage cliff.”

Since then, the cash rate has eased back a little. As of March 2026, it sits at 4.10%. But where it goes from here is genuinely uncertain.

One thing worth bearing in mind: the RBA’s tool is a blunt one. Mortgage holders represent about a third of the Australian economy. Rate changes don’t affect every Australian equally. Renters, outright homeowners and businesses without debt feel the same inflation but none of the mortgage pressure. That’s the trade-off built into how monetary policy works, and it’s why the debate around rate decisions is often so heated.

Bottom line: The cash rate has moved more in the past four years than in the previous decade. Knowing where it has come from helps you think clearly about where it might go next.

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Chapter 2: The Bank Signal – How Fixed Rates Tell You What’s Coming

Here’s something most borrowers don’t think about. When you compare a bank’s fixed rate to their variable rate, you’re reading their economic forecast.

Banks employ teams of highly paid economists whose job is to price these products. They’re making a calculated bet on where rates are heading, and they’ve baked that view into every number they publish.

The signal works like this.

• When fixed rates are cheaper than variable, the bank thinks rates are heading down. They’re willing to lock you in at a lower rate because they expect their cost of funding to fall along with it. If you take the fixed and rates do drop, the bank still earns more than if they’d just given you the variable. They’ve already priced the falls in.

• When fixed rates are more expensive than variable, the bank thinks rates are heading up. They’re charging you a premium for the certainty of a locked repayment. If you take it and rates rise, the bank loses nothing. You’ve paid for the insurance.

Now, here’s the practical implication. If we go into fixed rates thinking we’re going to beat the banks, we’re going to be disappointed. They have teams of smart people doing this full time, and eight times out of ten, they’ll get it right.

The better way to think about fixed rates is as a tool for certainty. Knowing exactly what your repayment is going to be for the next one, two or three years, regardless of what the RBA does. If you go in with that mindset, you’ll generally come out satisfied with the decision, whatever happens to rates.

Pro tip: Watch the gap between fixed and variable over time, not just at a single point. A shrinking gap often signals shifting market expectations before any official announcement.

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Chapter 3: What the Rates Are Actually Saying Right Now

So what does the signal look like in March 2026?

The picture across the big four is mostly consistent, with one notable exception.

Here’s what that table tells us, bank by bank.

• ANZ is offering their one and two year fixed rates at roughly similar levels to their current variable. The three year rate jumps noticeably higher. Their overall signal: rates are heading up, with more uncertainty the further out you go.
  
• CBA has all three fixed terms sitting well above their variable rate. Their one-year fixed is higher than ANZ, NAB and Westpac’s equivalent. CBA’s view is the most pointed of the four – they’re pricing in rate rises with conviction.
  
• NAB is the outlier. Their one and two year fixed rates are actually sitting below their variable rate of 5.85%. The one-year is around 5.74%. That’s a meaningful gap in the other direction. If you’re of the view that rates are going to keep climbing, NAB’s current pricing makes a fixed rate worth a closer look.
  
• Westpac sits somewhere in between. Their one and two year rates are not far off their variable, but the three year rate is higher. A mixed signal, leaning toward modest increases.

The overall read: three of the four major banks have their fixed rates sitting above variable. Under the framework we’ve just covered, the market consensus is that rates are heading up from here, not down. Fixing right now means locking in a premium above what you’re currently paying. Whether that premium is worth it depends on the numbers, and that’s the next chapter.

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Chapter 4: Running the Numbers – Three Scenarios

Let’s stop talking about rates in the abstract and look at some actual figures.

The example below uses a $600,000 owner-occupied loan on a 30-year principal and interest term. The variable rate starts at 5.74% and the two-year fixed rate is 5.89%.

Scenario A: Rates Rise as the Banks Predict

The variable rate climbs to 6.24% after two 25 basis point increases. The fixed rate holds at 5.89%.

Result: fixing saves you approximately $136 per month and around $3,264 over the two years. Fixing wins, but only just. Two rate rises actually have to happen for the fixed option to come out ahead.

Scenario B: Rates Don’t Move

The variable stays at 5.74%. The fixed stays at 5.89%.

Result: fixing costs you approximately $57 per month extra and around $1,368 over the two years. Variable wins. The premium you paid for certainty bought you nothing in rate savings.

Scenario C: Rates Are Cut Again

The variable drops to 5.24% by the end of year, down 0.5%.

Result: fixing costs you approximately $245 per month extra and nearly $2,940 over two years. Variable wins by a fair margin.

What the Scenarios Mean in Practice

Three scenarios, three different outcomes. The one that applies to you depends entirely on what actually happens to the cash rate over the next 24 months, and that’s something nobody knows for certain.

Right now, most of the major banks are forecasting at least one more 25 basis point rise, taking the cash rate to 4.10% by mid-2026. That’s Scenario A territory. But the world is unpredictable. Inflation could cool faster than expected. Global conditions could shift. The RBA could change course.

What this exercise really shows is that fixing is not a strategy for saving money on paper. It’s a strategy for managing certainty. If you can answer yes to “Would I sleep better knowing exactly what my repayment is for the next two years?”, that peace of mind has genuine value, separate from the rate comparison.

Most of the time, the decision to fix is more of a line ball. And that’s okay.

Pro tip: If you run these numbers and Scenario A only just wins, that’s not a strong case for fixing. The break-even point needs to feel comfortable given the uncertainty involved.

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Chapter 5: What Is Rate Lock?

If you decide to fix, there’s one more thing to understand before you sign anything: rate lock.

When you submit a fixed rate application, the rate the bank has advertised that day is not necessarily the rate you’ll pay at settlement. Settlement can take weeks, sometimes months. During that time, the bank can change their fixed rate offering at any point.

Rate lock is a feature that freezes your rate at the time of application for roughly 90 days. If the fixed rate rises between application and settlement, you pay the lower rate you locked in. The fee ranges from about $350 to $1,000 depending on the lender.

Here’s how the maths works. If a fixed rate increases by 0.25% between application and settlement on a $500,000 loan, that’s approximately $1,250 in additional annual interest. A rate lock fee of $600 looks cheap in that context.

One thing worth knowing: if the fixed rate actually drops between your application date and settlement, most lenders will put you on the lower rate at settlement, even if you’ve rate locked. You don’t get penalised for locking in when rates subsequently fell. You’ve just paid a fee for certainty you turned out not to need.

The only scenario where rate lock clearly doesn’t pay off: rates don’t move at all and you’ve paid the fee. You’re out $350 to $1,000 with nothing to show for it. But if you’re fixing in a rising rate environment and the period between application and settlement carries real risk, rate lock is worth considering.

Bottom line: Rate lock is insurance on your fixed rate during the application process. We HIGHLY recommend it in most circumstances.

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Chapter 6: What Should You Actually Do?

There is no universal right answer. Anyone who tells you otherwise is oversimplifying.

What there is, though, is a smarter way to think through it. Here are the four things that should shape your decision.

Watch the Gap Between Fixed and Variable

The relationship between fixed and variable rates is the most useful free piece of data available to any borrower. As we’ve covered, three of the four major banks currently have their fixed rates sitting above their variables. That’s the market’s best current guess at what’s coming.

When you see fixed rates dip below variable, the calculation changes. That’s when the bank is offering you a discounted path to certainty, and the case for fixing gets genuinely interesting.

Consider a Split Loan

A split loan divides your mortgage between a fixed portion and a variable portion. The split can be whatever ratio makes sense for you: 50/50, 70/30, 60/40.

You get certainty on the fixed portion, whatever the RBA does. And you keep the flexibility of variable on the rest, which means you can still use an offset account, make extra repayments and benefit from any cuts that come through.

For most borrowers in the current environment, a split loan is the most practical approach. It avoids betting everything on one outcome at a time when the outlook is genuinely uncertain.

Know Your Break Costs Before You Commit

If you fix your rate and then need to exit the loan early, whether to sell, refinance or restructure, you may face a break cost.

Break costs are calculated based on the difference between your locked rate and what the lender is currently offering for the same term. If rates have fallen since you fixed, the break cost can be significant. If rates have risen, it may be minimal or nothing.

The problem is you can’t calculate this upfront. It’s almost impossible to know at the time of fixing, because it depends on where rates are when you need to exit. The practical rule: don’t go into a fixed rate expecting to break it. The costs can be hefty, and they can catch people out.

The Best Rate on Paper Is Not Always the Best Loan in Practice

This one gets underestimated. A fixed rate that’s 0.10% cheaper than a competitor may come with restrictions on extra repayments, no offset account, limited redraw, or a lender who’s harder to deal with post-settlement.

Features, flexibility and your broker’s ability to work with the lender on your behalf all have real value. A loan that saves $50 a month on rate but costs $2,000 in break fees when your circumstances change is not the better deal. Evaluate the full picture.

What to Do Right Now

If you’re sitting on a variable rate and haven’t reviewed your loan recently, that’s the most useful place to start.

Check what your property is worth. Find out where your loan-to-value ratio sits. If your LVR has dropped below 80% since you last refinanced, you may be eligible for a sharper rate than you’re currently on. That single conversation with a broker could save more than any rate decision you make today.

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Conclusion

Fixing your rate is not about beating the banks. They’ve got the economists; we’ve got life circumstances. The goal is to find the type of rate that fits your situation, your plans and your level of comfort with uncertainty.

If you’d like to talk through what that looks like for you specifically, the team at Aussiewide Financial Services is here to help. We’ve worked with more than 6,000 Geelong families on their home and investment lending over 25 years, and we’re happy to run the numbers with you.

Book a free lending strategy session

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FAQ

Is now a good time to fix my home loan rate in Australia?

Whether now is the right time depends on your circumstances and your view on rates. As of March 2026, three of the four major banks have their fixed rates sitting above their variable rates, which signals their expectation that rates are heading up. If you want certainty about your repayments and are comfortable paying a modest premium for it, fixing makes sense. If you think rates will fall or stay flat, variable is likely to serve you better. A split loan covers both possibilities.

What happens if I fix my rate and then need to sell my property?

If you sell while on a fixed rate, you’ll generally need to exit the fixed term early, which can trigger a break cost. This is calculated based on the difference between your locked rate and the lender’s current rate for the same term. If rates have dropped since you fixed, the break cost can be substantial. Before fixing, consider how confident you are in staying in the property for the full fixed period.

Can I make extra repayments on a fixed rate loan?

Most lenders allow extra repayments on fixed rate loans up to a certain limit, typically $10,000 per year. Beyond that, additional payments are generally not permitted without triggering fees. If making extra repayments is important to your strategy, check the specific terms of any fixed product you’re considering, or keep a portion of the loan on variable where extra payments are unrestricted.

What is a split home loan and is it right for me?

A split loan divides your mortgage between a fixed and a variable portion. You choose the ratio that suits you. It gives you certainty on the fixed portion while keeping the flexibility of variable on the rest, including access to an offset account and the ability to make unlimited extra repayments on the variable side. For most borrowers in an uncertain rate environment, a split loan is the most balanced approach.

What is rate lock and should I use it?

Rate lock is a feature that guarantees your fixed rate at the time of application for around 90 days, while your loan goes through assessment and moves toward settlement. It costs between $350 and $1,000 depending on the lender. It’s worth considering if you’re fixing in a rising rate environment and there’s a risk rates could move before your loan settles. If a 0.25% rate rise occurs on a $500,000 loan before settlement, that’s around $1,250 in additional annual interest. The rate lock fee is often worth it in that context.

How do I know which lender is offering the best fixed rate?

The rates the major banks publish online are a starting point, not the full picture. As a mortgage broker, Aussiewide Financial Services has access to advertised rates and the ability to negotiate on your behalf across a wide range of lenders, including non-bank lenders who often price competitively. The best rate for you also depends on your loan size, LVR, whether you’re owner-occupied or investing and your repayment type. It’s worth getting a comparison done rather than going direct to your existing lender.

Does Aussiewide Financial Services charge for a rate review?

Using Aussiewide typically costs you nothing. Banks pay us a commission that they would otherwise allocate towards their own marketing and advertising, which means you generally get a better deal through us than going direct — because unlike a bank, we’re not limited to the products of any one lender.

In special circumstances a fee may apply, but you’ll always be advised before any lender recommendation is made. On top of free, independent lending advice, we bring 25 years of experience and a network of trusted advisors covering property and financial guidance more broadly. You can book a chat HERE.