Fixed or variable: how a broker frames the choice

Every rate cycle brings the same question: should I fix? It is usually asked as if it were a prediction question — where are rates going? — and that is the wrong frame. Nobody can tell you where rates are going. The useful version of the question is about you.

What each structure actually gives you

A fixed rate locks your interest rate, and therefore your repayments, for a set term. You buy certainty. In exchange, most fixed loans limit extra repayments, may not offer an offset account, and can charge break costs if you leave the fixed term early — for example if you sell or refinance.

A variable rate moves with the market. Your repayments can go up or down. In exchange, variable loans usually give you more flexibility: extra repayments, redraw, an offset account, and the ability to refinance without break costs.

A split loan does both: part of the balance fixed, part variable. It is a way of buying some certainty while keeping some flexibility.

The questions a broker asks

A good broker does not start with “where do you think rates are going?” They start with questions like these:

• How large is your buffer? If repayments rose, how long could you absorb it comfortably?
• Are you likely to sell, refinance or restructure within the next few years?
• Do you want to make extra repayments, and do you want an offset account?
• How much does certainty matter to you — would a rate rise keep you up at night?

The answers point to a structure. Two households with identical loans can reasonably land on different answers because their buffers, plans and temperaments differ.

Three things to check before you fix

If a fixed term is on the table, ask about break costs and how they are calculated; ask what limit applies to extra repayments during the fixed term; and diarise the end date, because the rate resets when the term finishes and that is a moment to review rather than let roll.

Where TNC Group fits

We do not choose your loan structure — that is your broker’s job with your accountant’s input where it matters. Our role is to make sure this conversation happens before the property search starts, so the loan is built around the plan rather than the plan being bent around the loan.

Next step

If you want the finance conversation in the right order, book a free 15-minute call: https://leads.leads.tncgroup.com.au/widget/booking/VIiJOVAo7mhEsE3xLNrb

General information only — not financial or credit advice. Loan features, fees and break costs vary by lender and change over time. Speak to your mortgage broker about your circumstances.