Fixed vs Variable Home Loans in 2025 – Which One’s Right for You?
Understanding Your Interest Rate Options
When buying a property, one of the most important decisions you’ll make is whether to choose a fixed-rate or variable-rate home loan. Each option has its pros and cons, and the right choice depends on your financial goals, risk tolerance, and lifestyle.
At CBM Mortgages, we help Sydney buyers and refinancers navigate these choices with confidence—so let’s break it down.
What’s the Difference Between Fixed and Variable Rates?
Fixed-Rate Home Loans
A fixed-rate loan locks in your interest rate for a set period—typically between 1 and 5 years, though some lenders offer terms up to 10 years. This means your repayments stay the same, regardless of what happens in the market.
Pros:
- Predictable repayments
- Protection from interest rate rises
- Easier budgeting
Cons:
- Limited ability to make extra repayments
- Break fees if you refinance or sell early
- Less flexibility if rates fall
Read our more detailed blog on Fixed Rate loans
Variable-Rate Home Loans
A variable-rate loan fluctuates with the market. If the Reserve Bank of Australia (RBA) adjusts the cash rate, your lender may follow suit—meaning your repayments could go up or down.
Pros:
- Flexibility to make extra repayments
- Access to features like offset accounts and redraw
- Benefit from rate drops
Cons:
- Repayments can increase if rates rise
- Harder to budget long-term
Why Fixing Your Rate Might Make Sense in 2025
With interest rates expected to remain volatile throughout 2025, many borrowers are considering locking in a fixed rate to gain peace of mind.
“For those conscious of a budget and who want to take a medium-to-long term position on a fixed rate, they can protect themselves from the volatility of potential rate movement,” says one of our senior brokers.
Fixed-rate terms of three to five years remain the most popular, as they strike a balance between stability and flexibility.
What Is a Rate Lock and How Does It Work?
If you’re applying for a fixed-rate loan, you may have the option to lock in your rate at the time of application. This typically involves paying a rate lock fee, which secures your interest rate for 60 to 90 days, depending on the lender.
This can be especially useful if:
- You’re still searching for a property
- You’re concerned about rates rising before settlement
- You want certainty during the approval process
Can You Get Pre-Approved for a Fixed-Rate Loan?
Yes! Fixed-rate loans can be pre-approved, giving you a clear idea of your borrowing power and helping you shop with confidence. Pre-approval also allows you to act quickly when you find the right property.
Want to avoid delays? Check out our blog on what to do when a fixed rate expires
Which Loan Type Is Right for You?
There’s no one-size-fits-all answer. The best loan for you depends on:
- Your income stability
- Your appetite for risk
- Your future plans (e.g. refinancing, selling, renovating)
Some borrowers even opt for a split loan, combining fixed and variable components to enjoy the best of both worlds.
On a variable rate loan you might decide to have an offset account linked to your loan, read our blog on offset accounts here
Let’s Find the Right Fit for Your Future
At CBM Mortgages, we’ll help you:
- Compare fixed and variable loan options
- Understand rate lock fees and pre-approval
- Choose a loan that aligns with your goals
Call us today on 02 8068 0534 or get in touch online to get started.
Further Reading:
- Read our First Home Buyers page here
- Read our page on how Medical occupations can avoid mortgage insurance
- Read another blog on Fixed v Variable
- First Home Buyer Grants – Revenue NSW
- Are you looking for a Mortgage Broker in Bronte
Disclaimer:
The information provided in this article is for general guidance only and does not constitute financial or legal advice. It does not consider your personal circumstances. Before making any financial decisions, seek professional advice from a licensed mortgage broker or financial consultant. This content is protected by copyright laws and may not be modified, reproduced, or republished without prior written consent.
Written by Craig McDonald 15/06/2025
