Choosing between a fixed or variable mortgage rate is more than a short-term decision—it’s a strategic move that can shape your financial future. Lock in the wrong rate at the wrong time and you could pay thousands more than necessary. Get it right, and you could save big, accelerate equity growth, and give yourself a buffer against market volatility.
To help you make a data-informed decision, this guide draws on a decade of interest rate history to examine how fixed and variable mortgage rates have performed. You’ll also find real-world case studies, expert forecasts, and smart strategies to help you lock in the best mortgage structure for the years ahead.
We’ll cover:
- A 10-year cost comparison of fixed vs variable mortgage rates
- When each strategy worked—and when it didn’t
- What the next five years may look like for borrowers
- Smart mortgage structuring tactics for risk and savings
10 Years of Fixed vs Variable Mortgage Rate Trends
Mortgage rates in Australia have shifted dramatically over the past decade. Economic cycles, global shocks, Reserve Bank of Australia (RBA) policy, and inflation have all influenced the landscape.
Here’s how the fixed and variable market evolved:
2013–2015: Rates Begin to Drop
- Variable rates: 5.5%–6%
- Fixed rates: 4.5%–5.5%
- Many borrowers locked in fixed rates for slightly lower repayments and peace of mind.
2016–2019: Steady Decline
- The RBA cut the cash rate multiple times.
- Fixed rates: Dropped to 3.5%–4.5%
- Variable rates: Fell under 4%
- Variable-rate borrowers benefited most as rates trended downward.
2020–2021: Record Lows
- The pandemic pushed rates to historic lows.
- Fixed rates: As low as 1.99% for 2- or 3-year terms
- Variable rates: Typically between 2%–2.5%
- Many borrowers locked in 2–3-year fixed terms during this window.
2022–2023: Sharp Rebound
- As inflation surged, the RBA rapidly increased the cash rate.
- Variable rates: Exceeded 6%
- Fixed rates: Rose sharply, but existing fixed-rate borrowers were shielded from the shock.
Average Rates Comparison: Fixed vs Variable (2013–2023)
| Year | Avg Fixed (3-Year p.a.) | Avg Variable (p.a.) |
| 2013 | 5.20% | 5.50% |
| 2015 | 4.60% | 4.85% |
| 2017 | 4.10% | 3.90% |
| 2019 | 3.80% | 3.60% |
| 2021 | 2.10% | 2.25% |
| 2023 | 5.75% | 6.10% |
What the data shows:
- Fixed loans saved money during rising-rate periods (e.g. 2020–2023).
- Variable loans offered savings when rates trended down (e.g. 2016–2019).
- The timing of your decision—not just the loan type—is critical.
Case Studies: Fixed vs Variable in the Real World
Let’s take a closer look at how borrowers fared in different market environments.
Case Study 1: The Fixed Rate Advantage
Scenario:
Emma and David took out a $600,000 loan in 2020 and locked in a 3-year fixed rate of 2.10%.
Outcome:
- Their monthly repayment: ~$2,240
- In 2023, while variable rates exceeded 6%, they paid the same rate
- If they’d gone variable, their repayments would have jumped to ~$3,600
- Total interest saved: ~$45,000 over three years
Lesson: Locking in a low fixed rate at the right time can create major savings and protect cash flow.
Case Study 2: The Variable Rate Advantage
Scenario:
Michael and Sarah chose a variable rate of 3.90% on their $500,000 loan in 2017 instead of fixing at 4.10%.
Outcome:
- Their rate dropped to 3.25% by 2019
- They made extra repayments while rates were low
- Paid down their loan faster, reducing overall interest
Total savings: ~$20,000 compared to a borrower who fixed
Lesson: Variable loans provide flexibility and reward you during falling-rate environments—if you’re willing to ride the ups and downs.
What About the Next 5 Years?
Expert Predictions: 2024–2028
- Inflation is expected to stabilise, and rate cuts may begin in 2024 or 2025.
- Lenders are already trimming fixed rates slightly, suggesting expectations of moderation.
- The RBA is signalling caution but may move to ease rates if economic pressures soften.
What This Means for Borrowers
- Fixed rates may still be attractive if you want repayment certainty while rates remain elevated.
- Variable rates could become more appealing if you believe we’re near the peak of the rate cycle.
Key factor: Your decision should reflect your own risk tolerance, income stability, and investment horizon—not just market sentiment.
Smart Mortgage Structuring Strategies
Don’t want to bet everything on one type of loan? Use these tactics to spread your risk and improve flexibility.
1. Go with a Split Loan
Divide your mortgage into fixed and variable components.
Example:
- 60% fixed at 5.75% (locked for stability)
- 40% variable at 6.10% (flexibility + offset access)
Benefits:
- Partial protection from rate hikes
- Some freedom to make extra repayments or refinance
2. Choose a Shorter Fixed Term
Instead of locking in for 5 years, consider a 1- to 3-year term.
Why it works:
- Allows you to revisit the loan structure sooner
- Keeps refinancing opportunities open if rates fall
3. Make Extra Repayments While Variable Rates Are Low
If you go variable and rates begin to drop:
- Maintain higher repayments
- Pay down principal faster
- Build equity more efficiently
Use a home loan calculator to model how different repayment levels affect your interest savings and loan term.
4. Monitor the Market and Review Annually
Even fixed-rate borrowers should:
- Track market rates
- Compare lender offers at least once a year
- Be ready to refinance when your fixed term ends
Tip: Set calendar reminders 6 months before your fixed term expires to start shopping around.
Final Verdict: Fixed vs Variable Mortgage Rates
When Fixed Rates Make Sense:
- You need predictable repayments
- You want to insulate yourself from future rate hikes
- You’re budgeting tightly or managing multiple investment loans
When Variable Rates Make Sense:
- You want access to offset/redraw
- You believe rates will decline over the next 2–3 years
- You have room to absorb some volatility in your repayments
Why Many Investors Choose a Split:
- Combines the best of both worlds
- Keeps options open for extra repayments, refinancing, or using equity
- Reduces stress when markets are uncertain
Final Thoughts: Get the Timing, Not Just the Type, Right
Choosing between fixed and variable isn’t about which one is “better.” It’s about when to choose each, how long to lock in, and what mix suits your investment or ownership strategy.
The big takeaway? Borrowers who regularly reviewed their loan, made use of calculators, and refinanced strategically came out ahead—regardless of whether they started with fixed or variable.
Want to Compare Fixed and Variable Loan Options Right Now?
We’ll help you model different repayment structures using real lender data and explore which loan type suits your current goals—and future plans. Whether you’re buying your first home, refinancing, or investing, we can help you make the smartest choice with the least stress.