Whenever interest rates move, the fixed versus variable question pops up like clockwork. In 2026, that question carries even more weight because the market has shifted from expecting cuts to managing sustained higher rates.
With the official cash rate now at 4.10 per cent after back-to-back rises, there is a genuine debate about which direction makes sense for different types of borrowers.
Some commentators and economists are forecasting that inflation will remain above the RBA’s preferred 2 to 3 per cent range through much of 2026, and that could mean further interest rate action.
In this environment, it’s worth revisiting the old ‘fixed versus variable’ debate with fresh eyes.
The case for fixed rates
1. Certainty and budgeting ease
One of the biggest advantages of a fixed-rate loan is knowing what you will pay for the fixed term. If having predictable repayments simplifies your budgeting and gives you peace of mind, that can be a huge benefit.
2. Protection from further rate rises
If the RBA does tighten again or bank funding costs increase further, your fixed portion remains unaffected.
However, there are some practical realities in 2026 you need to be aware of:
- Fixed rates have been rising too, as lenders priced in the risk of ongoing rate volatility. * You may pay a premium to secure that certainty.
- Fixed loans often have restrictions on redraw and may have break costs if you exit early.
The case for variable rates
1. Flexibility and potential savings if rates fall
If rates were to ease later in the year, a variable rate loan would allow you to benefit directly from those movements. Over time, that flexibility can translate into money saved.
2. Access to loan features
Most variable loans give you full access to redraw and offset accounts, which can make a big difference to the life cost of your loan.
3. Negotiation opportunities
Variable rates still show differences between lenders, and if you are comfortable negotiating, there can be benefit in shopping around.
What about a split loan
For many borrowers, a split loan that combines a fixed and variable portion gives the best blend of certainty and flexibility. It allows you to lock in part of your loan against future rises while keeping some portions variable to benefit if rates soften.
This strategy suits people who:
- Want some repayment certainty but not lose all flexibility.
- Are nervous about further rate moves in either direction.
- Want to maintain redraw and offset access on part of their loan.
How to make the choice that suits you
Here’s a simple way to think about it:
- If you prioritise budget certainty and stress less about cost over time, then fixing some or all of your loan might work best.
- If you value flexibility, want to use loan features, or see the possibility of rates easing, then a variable could suit you.
- If you want a balanced risk approach, a split loan is worth exploring.
There is no one-size-fits-all answer, and in a dynamic market like 2026, what suits you will depend on your financial goals, risk tolerance, and future plans.
Talking through your situation with an experienced adviser means you make the choice based on your circumstances, not just headlines. NMC Finance can help you weigh the pros and cons and tailor a strategy that matches your priorities.
This blog is intended for general informational purposes only. For personalised advice tailored to your unique financial situation, please contact NMC Finance.
