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Fixed versus variable: winner revealed

The great Australian debate around fixed versus variable home loans just got a lot more interesting with the latest data from CANSTAR.

CANSTAR’s financial analysts evaluated the figures on 3-year fixed rate home loans taken out over the past 24 years to see if home buyers were better off on average by choosing a 3-year fixed rate compared to a standard variable rate home loan. The results were revealing.

In fact, since August 1992, they discovered there were:

  • 126 months when it was financially beneficial to have fixed your loan for a 3-year term
  • 128 months when it was financially beneficial to have chosen a variable loan

To put it succinctly: based on this historical data, homeowners have pretty close to a 50/50 chance in choosing the right home loan.

“Market shifts do occur so we did expect that there would be occasions where those on fixed loans would have come out better, but we didn’t think it would be a split decision between the favourable and unfavourable,” says CANSTAR research manager Mitchell Watson.




The basis of CANSTAR’s calculation involved taking an average of the fixed and variable home loan rates offered by the big four banks over 36-month fixed home loan rate based on a $300,000 home loan, paying interest only.

“We tracked that information against changes in variable rates, whether that was Reserve Bank movement on the cash rate, or if there were other cycle changes as well,” Mitchell explains.

“When fixed rates are set, considerations are made to funding costs, and so on, but as with all of us, no one has that crystal ball that will enable us to know exactly what will happen over the next three years. However, as we saw with the global financial crisis, things can change relatively quickly, and that can cause a change in outcomes when it comes to fixing your loan.”

If you’re considering a fixed rate home loan, Mitchell warns some people will be better off, while others “not so much”.

“When it comes to a fixed rate loan, people should not necessarily think about how they will be better off financially – which is always a bonus – but more the certainty that comes with fixing a loan around your repayments for the period you have it fixed for,” he says.

“Fixed rate loans is a very interesting space when it comes to features,” Mitchell continues. “Historically they were looked at as an inferior option to a variable rate loan, but the tide is definitely shifting in that now we are seeing more fixed rate loans with an offset account, and we’re also seeing loans that don’t place any real restriction on the amount you repay on a fixed rate loan, outside full repayment.




“Customers do want more flexibility when it comes to fixed rate loans, and what they can do within them, and there is a fairly low fixing culture in Australia – roughly 20 per cent of loans are fixed at any one time, which is in stark contrast to New Zealand where it’s completely the opposite.

With home loans requiring a sizeable investment, and long-term commitment, people are advised to thoroughly research their options.

“I think with the amount of information that’s now available in the marketplace, people have a lot more opportunity to access it easily, especially online,” Mitchell says. “That said, I still think that there is a level of apathy towards fully understanding what they’re entering into when it comes to a fixed rate loan.”

As this generic overview doesn’t factor in your financial situation or personal goals, we suggest you talk to your mortgage broker or a Homeloans Accredited Mortgage Consultant about the best home loan rate for you.


Still unsure? Get the best of both worlds on the Homeloans Ultra Plus split “combo” loan, with 3-year fixed loans from just 3.79%pa* (comparison rate 4.04%pa) and variable rates from just 3.69%pa* (comparison rate 3.85%pa)!


*Rates shown apply to owner occupier loans with principal & interest repayments and LVR less than or equal to 80%. Additionally, fixed rates shown apply to loans of $200K and above where <=50% of the loan is fixed, and variable rates shown apply to loans of $500K and above. Rate surcharges, restrictions and additional credit criteria may apply to other loans. The comparison rate is calculated on the basis of a loan of $150,000 over a term of 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Terms & conditions, fees, charges and credit criteria apply.

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Veda Dante

Veda Dante is an accomplished journalist, consultant and content creator who has nearly 30 years’ experience writing about everything from tourism, hospitality and health to architecture, pools and luxury goods. When she’s not producing copy for clients, this self-confessed word nerd is usually writing and photographing the Byron Bay region for her blog www.livebyron.com.au

The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Homeloans Ltd.