Fixed vs Variable in 2026: How to Make the Right Call Right Now

You’ve probably seen the headlines. Rates have shifted, the RBA has moved, and suddenly everyone from your uncle to your Uber driver has an opinion on whether you should fix your home loan. Here’s what I’ll tell you after fifteen-plus years of writing loans across the Shire: the right answer isn’t about predicting the future. It’s about understanding your own situation clearly enough to make the choice that actually fits.

Let me walk you through how I think about this with my clients right now, in March 2026.

Where rates actually sit today

As I write this, competitive variable rates for owner-occupiers with a strong LVR are sitting around 5.60% to 5.85%. Two-year fixed rates from a handful of lenders are coming in between 5.25% and 5.50%, and three-year fixed is hovering around 5.35% to 5.65% depending on the lender and your deposit size.

That spread matters. When fixed rates are below variable — which is where we are right now — it tells you the market is pricing in rate cuts ahead. The swap rates that banks use to price fixed loans have already baked in expectations of further easing. So if you’re fixing purely because you think you’re “locking in before rates drop,” you need to understand: the drop is already partially priced into that fixed rate.

That’s not a reason to avoid fixing. It’s a reason to fix for the right reasons.

When fixing makes genuine sense

I’ll fix a client’s rate — or a portion of it — when one or more of these things are true:

• Cash flow certainty is critical. You’ve just stretched into a place in Cronulla or Woolooware at $2.2M, and the repayment difference between 5.50% fixed and a potential variable spike to 6.10% is the difference between comfortable and white-knuckle. On a $1.6M loan, that’s roughly $640 a month. That’s not nothing.
• You’re on a tight budget with no buffer. First home buyers in Jannali or Engadine who’ve put down 10-15% and are carrying LMI — if your serviceability headroom is slim, a fixed rate gives you breathing room to build savings.
• You won’t use offset anyway. If you don’t have significant cash sitting in an offset account, one of the biggest advantages of variable disappears.

When variable is the stronger play

Here’s where I get opinionated: for most borrowers in the Shire right now, variable with a good offset account is the better position. Here’s why.

Let’s run the numbers on a $900,000 loan — realistic for someone buying a townhouse in Kirrawee or a unit in Miranda.

• Variable at 5.75% with $40,000 in an offset account means you’re effectively paying interest on $860,000. Your monthly repayment stays at the full amount, but $192 of every month’s payment that would have gone to interest is now hitting principal instead. Over three years, that offset saves you over $6,900 in interest and puts you ahead on your loan balance.
• Fixed at 5.40% looks cheaper on paper, but most fixed loans don’t come with a functional offset. You’re paying interest on the full $900,000. And if rates drop to 5.00% variable in 18 months — which is within the range of current market pricing — you’re stuck paying 5.40% with no flexibility.

The variable borrower with an offset and the discipline to leave that cash alone will almost always come out ahead over a three-year window when rates are trending down.

The split option — and when I actually recommend it

Splitting your loan — say 50% fixed and 50% variable — gets talked about like it’s the “safe” middle ground. Sometimes it is. But I want you to understand what you’re actually doing: you’re hedging. You’re paying a slight premium on the fixed portion to buy certainty, while keeping flexibility on the variable side.

I’ll recommend a split when someone has a large loan — north of $1.2M — and genuinely can’t stomach the idea of repayments jumping $800 a month if rates move against them. But I won’t recommend it just because you can’t decide. Indecision isn’t a strategy.

The one thing that matters more than your rate type

Whatever you choose, the single most impactful thing you can do is make sure you’re on a competitive rate to begin with. I regularly see clients across Caringbah, Sylvania, and Sutherland sitting on rates 0.50% to 0.80% above what I can get them today — on the same loan, with the same lender, just because they haven’t asked. That’s $4,000 to $6,500 a year on a million-dollar loan, sitting on the table.

Let’s look at your loan together

If you’re weighing up fixed versus variable — or you haven’t reviewed your rate in the last twelve months — I’d love to run the numbers with you. No cost, no obligation, just clarity. I’m based right here in the Sutherland Shire and this is genuinely what I love doing.

Call me on 0424 175 869 or submit a quick enquiry at annawilliams.finance and I’ll be in touch.