Fixed or Variable in 2026? Here's How to Actually Decide

Three rate rises into 2026 and the most common question I'm hearing is some version of: should I fix my rate right now?

It's a reasonable question. When rates are moving up, locking in feels like a way to take control. But the decision is more nuanced than most rate commentary suggests, and getting it wrong can cost you real money.

Here is how I actually work through this decision with clients.

What Fixing Actually Does

When you take a fixed rate loan, you agree to pay a set interest rate for a nominated period, typically one to five years, regardless of what the RBA does in that time. The benefit is certainty. The risk is that if variable rates fall, you stay on the higher fixed rate and potentially face break costs if you want to exit early.

The variable rate moves with the market. When the RBA hikes, your repayments go up. When they cut, they come down. You carry the uncertainty, but you also get the upside if rates fall.

Where We Are Right Now

The RBA has lifted the cash rate three times in 2026. Variable rates across most lenders are sitting significantly higher than they were at the start of the year.

What matters for the fix-or-variable question is not where rates are today, but where they are likely to go from here.

Here is the honest reality: nobody knows for certain. Not the banks, not the economists, and not us. But we can look at what the market is pricing in.

Fixed rates are priced based on what the bond market expects to happen, not what is happening now. If you are seeing fixed rates below current variable rates, the market is implicitly suggesting cuts may be coming. If fixed rates are above variable, the market is pricing in further hikes.

Right now, lenders' one and two year fixed rates are sitting close to or above variable rates at most institutions. That tells you lenders are not expecting significant relief quickly.

The Case for Fixing

Fixing makes sense if your priority is certainty. If you are stretched at your current repayment level and another rate rise would cause genuine hardship, a fixed rate buys you time. It also helps with budgeting: you know exactly what your mortgage costs every month for the fixed period.

Fixed rates are also worth considering if you believe rates will remain elevated or rise further. Locking in before another hike means you capture today's rate, not tomorrow's.

The Case for Staying Variable

Variable loans carry features that fixed loans typically do not: offset accounts, unrestricted additional repayments, and the flexibility to refinance or sell without break costs.

Break costs on fixed loans can be significant and are difficult to predict. If you are likely to sell, refinance, or make large additional repayments in the next two to three years, a fixed loan may cost you more in break fees than you save in rate certainty.

Variable also gives you the benefit if rates fall. Three rate rises into a cycle, it is not unreasonable to expect that at some point the RBA begins cutting. Variable rate borrowers benefit immediately. Fixed rate borrowers do not until their fixed period expires.

The Split Loan Option

A split loan divides your mortgage into a fixed portion and a variable portion. You might fix 60% of your loan for two years and keep 40% variable. This lets you hedge your exposure rather than making an all-or-nothing call.

The split also preserves flexibility: you keep an offset account active against the variable portion, can make additional repayments on the variable part without penalty, and have some certainty on the bulk of your debt.

This is the approach we recommend most often in the current environment, particularly for borrowers who are uncertain about where rates are heading.

What I'm Seeing With Clients Right Now

The clients who are most stretched right now are those on higher variable rates without an offset or redraw buffer. Rate rises have hit their monthly cashflow hard with no flexibility to absorb them.

The clients navigating this more comfortably are those who structured their loans with offset accounts, have been actively parking savings there, and have a buffer that softens the impact of rate movements.

If you are thinking about fixing, the decision should not be about rates in isolation. It should factor in your financial position, how long you plan to hold the property, what flexibility you need, and whether the features of a fixed loan actually align with your situation.

How to Make the Right Call for Your Situation

There is no universal right answer here. The right loan structure for a first home buyer who has used every dollar of their savings is different from the right structure for an investor with multiple properties and a substantial offset balance.

What I can tell you is that most borrowers are not reviewing their loan structure often enough. If you have not had a proper review since before the rate rises started, now is the time.

We compare across 35+ lenders and can model what different structures look like in your specific situation, including what break costs might apply if you are already on a fixed rate and want to exit. The conversation is free, and you will come out of it with a clear picture of where you actually stand.

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