Fixed vs Variable in 2025: Which Should You Choose?
With rates falling, is it time to fix or stick with variable? We analyse the numbers.
Raj Bhangu
Principal Mortgage Broker
Key Takeaways
- 1Variable rates benefit from RBA cuts immediately; fixed rates have cuts priced in
- 2Fixed offers payment certainty but has break costs; variable has full flexibility
- 3Consider split loan: 60% variable (flexibility + cuts) and 40% fixed (certainty)
- 4If economists are right about more cuts, variable may outperform fixed over time
The fixed vs variable decision has never been more important. With rates falling, making the right choice could save or cost you thousands.
Current Rate Landscape (September 2025)
- Average variable rate: 6.10%
- Best variable rate: 5.69%
- 2-year fixed: 5.49%
- 3-year fixed: 5.29%
The Case for Variable
- Benefits from future RBA rate cuts immediately
- Full flexibility (extra repayments, redraw, offset)
- No break costs if you need to refinance or sell
- Economists predict more cuts ahead
The Case for Fixed
- Payment certainty, making it easier to budget
- Protection if rates unexpectedly rise
- Current fixed rates factor in expected cuts
- Peace of mind
Example Comparison
On a $600,000 loan over 30 years:
- Variable at 5.89%: $3,548/month
- 3-year fixed at 5.29%: $3,324/month
- Monthly difference: $224
But if variable rates drop to 5.29% over the next 12 months (likely), you'd be equal. Further drops would favor variable.
Our Recommendation
Consider a split loan: fix a portion for security while keeping the rest variable to benefit from rate cuts. For example:
- 60% variable (benefits from cuts, full flexibility)
- 40% fixed (provides some certainty)
Not sure what's right for you? Let's discuss your situation and find the best structure.
Related Tool
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Sources & References
This article references information from the following authoritative sources:
Raj Bhangu
Principal Mortgage Broker
Expert mortgage broker helping Australians achieve their property dreams with personalized home loan solutions.
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As a mortgage broker, iSmart Finance receives commissions from lenders when we successfully arrange a home loan. This does not affect the interest rate or fees you pay. Our service is free for you, and we're committed to finding the best loan for your needs.
About iSmart Finance
iSmart Finance Group ACN 608 986 554 is Credit Representative 481761 of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237). We are members of the Finance Brokers Association of Australia (FBAA) and comply with the National Consumer Credit Protection Act 2009.
Our content is based on industry expertise, regulatory guidelines from ASIC and APRA, and data from the Reserve Bank of Australia. All information is current as of the publication date and subject to change.
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