With interest rates constantly on the move, it’s no surprise that many Aussie homeowners are weighing up whether to lock in a fixed mortgage rate. It’s a major financial decision that could impact your budget and long-term goals—especially in a market as unpredictable as 2024. The question is: should you fix your mortgage rate now, or stick with the flexibility of a variable loan?
Let’s break down the benefits and risks of fixing your rate, plus look at what’s happening in the market right now to help you decide what makes the most sense for your situation.
Understanding the Basics: Fixed vs Variable Rates
A fixed-rate home loan means your interest rate—and your repayments—stay the same for a set term, usually between one and five years. This consistency makes it easier to budget, especially if you’re watching your pennies.
On the flip side, a variable-rate loan fluctuates with the market. You might enjoy lower repayments when rates fall, but you’ll also feel the sting when rates climb. The flexibility of variable loans can be a win for borrowers who are comfortable with a bit of financial ebb and flow.
When Fixing Your Rate Makes Sense
Rates Are Likely to Rise
When the Reserve Bank of Australia (RBA) hints at future rate hikes, fixing can be a smart move to protect your repayments from going up. Locking in a rate now can shield you from future financial pressure.
You Prefer Predictability
If you like knowing exactly what’s coming out of your bank account each month, a fixed rate gives you peace of mind. It’s especially handy for families on a tight budget or anyone with fixed income sources.
You’re Budget Conscious
If even a small bump in interest rates could stretch your budget too far, fixing offers certainty. You’ll know your repayments won’t change for the length of the fixed term, which can ease financial anxiety.
You’re Planning to Refinance or Sell Soon
Fixing your rate for a short term can work well if you know you’ll be refinancing or selling in the near future. It gives you stability for now without committing for too long.
When You Might Want to Stay Variable
The Market Suggests Rates Could Drop
If economic indicators or RBA forecasts hint at falling rates, a variable loan could save you money. You’ll benefit from lower repayments if rates trend downward.
You Want More Flexibility
Fixed-rate loans often come with restrictions on making extra repayments or refinancing. If you want the freedom to pay off your loan faster or make changes along the way, a variable loan might suit you better.
Your Plans Aren’t Set in Stone
If you’re unsure whether you’ll stay in your current home or refinance soon, the exit costs from a fixed loan—like break fees—can be a downside. A variable rate gives you more wiggle room.
What’s Happening in 2024?
The current landscape sees interest rates stabilising after a series of RBA hikes in previous years. Economists expect the RBA to tread carefully, but there’s still chatter about potential increases later in 2024 to keep inflation in check.
This climate has left many borrowers sitting on the fence—fixed rates have crept up slightly but still offer value if you're after stability. Variable rates, while slightly lower in some cases, could rise if the economy picks up steam again.
Things to Ask Yourself Before Fixing
What Are My Financial Priorities?
Are you more concerned with long-term savings or short-term certainty? If locking in a steady repayment is more important than saving a few bucks here and there, fixing may be worth it.
Could I Handle a Rate Increase?
Would a 0.5% or 1% increase in repayments cause financial strain? If yes, it might be worth locking in a fixed rate before any future hikes.
How Long Will I Stay in My Current Home?
If you plan to move, sell, or refinance in the next few years, make sure your fixed term aligns with your timeframe to avoid costly break fees.
What’s the Gap Between Fixed and Variable Rates?
Sometimes fixed rates are only slightly higher than variable ones, making it easier to justify locking in for the peace of mind.
Consider a Split Loan Option
Can’t decide? You don’t have to choose just one. A split loan lets you fix part of your loan while keeping the rest on a variable rate. This way, you get the predictability of a fixed rate with the flexibility of variable terms—a popular option for borrowers who want balance.
Let the Experts Help You Navigate the Market
Making a call on fixed vs variable can feel overwhelming. That’s where an experienced mortgage broker—like the team at Wealthy You—can step in. We work with a range of lenders and help tailor mortgage solutions to your goals and lifestyle, taking the stress out of making big money moves.
Whether you’re refinancing, buying your first home, or upgrading to something new, our brokers can help you make sense of the current home loan options and find what works for your situation.
Fix It or Flex It? The Choice Is Yours
Choosing whether to fix your mortgage rate isn’t just about timing the market—it’s about understanding your financial goals and comfort levels. With rates expected to shift again in late 2024 or early 2025, now is the perfect time to evaluate your options.
If you’re leaning towards a decision but want that expert reassurance, we’re here to help you weigh it all up with confidence.
FAQs
What happens when my fixed-rate period ends?
When your fixed term finishes, your loan usually reverts to your lender’s standard variable rate. At that point, you can stick with it, negotiate a new fixed term, or explore refinancing.
Can I make extra repayments on a fixed-rate loan?
Some lenders allow limited extra repayments—often capped around $10,000 to $20,000 per year. Always read the fine print or ask your lender directly.
Are fixed rates higher than variable rates right now?
Generally, yes—but the difference isn’t always dramatic. The extra you pay in interest could be worth the certainty, especially if rates rise over your fixed term.
What are break costs, and when do they apply?
Break fees are charged if you exit a fixed loan early—like if you refinance or sell. They can be hefty, so it’s important to factor them into your decision.
Can a fixed rate affect other financial goals?
Potentially, yes. If you’re looking to refinance your car loan, for example, the rigidity of a fixed home loan might limit your borrowing capacity or flexibility in the short term.
If you have any questions or need further assistance, please contact us.
info@wealthyyou.com.au
☎️ (02) 7900 3288
Related Stories:
