With the latest rate increase now in, I wanted to run another updated comparison between current variable rates and what’s available on fixed terms — and how lender forecasts might impact the decision over 1–5 years.
As always, this isn’t about predicting the future perfectly (because almost no one does). It’s about weighing up:
- Flexibility vs certainty
- Forecasts vs your personal circumstances
- And whether peace of mind is worth something to you**
First: A Quick Reality Check on Fixed Rates
Before diving into numbers, it’s important to remember what fixing actually means.
Fixed rates often:
- Limit extra repayments (commonly capped around $10,000 per year)
- Don’t allow redraw of additional repayments
- Don’t offer offset (in many cases)
- Can trigger break costs if you refinance, sell, or change products
In other words, a fixed loan is generally a “set and forget” product.
You can split your loan (part fixed, part variable), which gives you some flexibility — but you’ll still have restrictions on the fixed portion.
So when you fix, you’re not just choosing a rate — you’re choosing less flexibility in exchange for certainty.
The Bigger Picture: Forecasts Aren’t Guarantees
One of the most interesting charts I looked at recently showed how wrong many rate forecasts have been over the past few years.
Some economists are permanent pessimists.
Some are permanent optimists.
Very few consistently get it right.
Just a few months ago, several banks were predicting falling rates. Now we’ve seen increases and upward revisions.
So when we model savings or costs from fixing — it’s based on forecasts. And forecasts change.
That’s why I always say:
If fixing gives you certainty for an important life event, don’t let a spreadsheet override your comfort level.
The Numbers – February 18 Update
For this comparison, I’ve used:
- Loan size: $680,000
- Current variable rate: 39% (reflecting the recent increase)
- Comparing against the cheapest fixed options available at the time of recording
1-Year Fixed
- Variable starts at 5.39%
- Forecast increase to around 5.64% mid-year (based on current lender projections)
- Fixed rate: 49%
If those forecasts are correct, fixing for one year could save roughly:
➡ ~$532 over 12 months
That’s not life-changing — but if you value certainty over the next year (especially as a first home buyer or someone upgrading), it’s not a bad trade-off.
2-Year Fixed
Under current projections:
- Variable rises to 5.64%
- Then potentially falls back late next year (around 5.39% and possibly 5.14%)
If that path eventuates, a 2-year fixed could save around:
➡ ~$1,007 over two years
Again — small in the scheme of things, but it shows that fixing isn’t necessarily “losing money” in this environment.
3 Years and Beyond
This is where things get murkier.
There aren’t many reliable forecasts beyond two years. After that, it becomes increasingly speculative.
In my modelling, I’ve held variable around 5.14% longer term — but that’s simply a placeholder assumption.
When you’re fixing for 3–5 years, the decision becomes less about “beating the bank” and more about:
- Are you planning a family?
- Taking time off work?
- Starting a business?
- Managing tighter household cash flow?
If you want three years of stable repayments and no surprises, that certainty can be worth paying for — even if variable ends up slightly cheaper.
How I Think About It
I look at fixed rates a bit like insurance.
If you fix and rates fall slightly, you might “miss out.”
But if you fix and rates rise, you’ll be glad you did.
And in both cases, you’ve removed uncertainty.
The key question isn’t:
“Will I win by $800 over two years?”
It’s:
“Will I sleep better knowing exactly what my repayments are?”
So… Should You Fix?
There isn’t a universal right answer.
If flexibility matters most — variable wins.
If certainty matters most — fixed can absolutely make sense.
If you want a balance — splitting the loan is often a good middle ground.
The spreadsheets help.
The forecasts help.
But your personal situation matters more.
If you’re unsure, it’s worth running the numbers properly for your loan size and repayment goals.