Rate comparison only works as a snapshot. The rate you see advertised today is the rate a lender was offering on the day you looked, for a borrower with a particular deposit, loan size and property type. A week later it may be different, and the rate you are actually offered can differ from the headline figure once your own details are priced in.
So the useful skill is not memorising who is cheapest. It is knowing how to take a clean snapshot, put fixed and variable options side by side on the same basis, and understand what you are locked into if you pick the fixed one.
This guide sets out that process. It does not tell you which way rates will move — no one can — and it does not tell you which option suits you. It gives you a way to ask better questions and read the answers properly.
Start with your own numbers, not the advertised ones
Before opening a comparison page, write down the four things that determine what you can actually be offered:
- Loan amount and how much deposit or equity sits behind it.
- Whether you are buying or refinancing, and whether the loan is owner-occupied or investment.
- Repayment type — principal and interest, or interest-only, and if interest-only, for how long.
- Loan term remaining, because a shorter term changes the monthly repayment even when the rate is identical.
With those in hand, you can compare two products on equal footing. Without them, you are comparing someone else's scenario to yours.
What fixed and variable actually change
The mechanical difference is simple, and it is the part worth getting right.
With a fixed rate, the rate is set for an agreed period. Your repayment stays the same across that period, which also means it does not fall if variable rates fall. When the fixed period ends, Moneysmart (ASIC's consumer education site) notes that your loan will usually move to the lender's variable interest rate — the revert rate — unless you switch home loans or agree to another fixed-rate period. That revert rate is worth finding out before you sign, because it is the rate you land on automatically.
With a variable rate, the rate can move during the life of the loan. Moneysmart notes that changes in the cash rate may influence variable home loan rates, but lenders can also change rates for other reasons. That means a variable rate is not simply a pass-through of one published indicator; the lender has discretion, and your repayment can go up or down.
A third structure — splitting part of the loan fixed and part variable — is offered by many lenders. It is not a way to avoid the trade-off; it is a way to divide it. Whether it helps depends on how much of the balance sits on each side and what the fees are for running two portions.
Taking the snapshot
Here is a workable method. It takes about half an hour.
- Pick one date and record it. Every rate you write down gets the date next to it. Rates you collected across three weeks are not comparable.
- Collect the same fields for every product. A rate without its conditions is not information.
- Capture the comparison rate as well as the headline rate. The comparison rate folds in some upfront and ongoing costs, which is what makes two differently priced loans comparable.
- Note whether the rate is conditional. Package discounts, minimum repayments and required accounts can all be attached to a headline number.
- Save the product page or a screenshot. Rates move; a record of what you were shown lets you check what changed.
| Field to capture | Why it matters |
|---|---|
| Headline rate and comparison rate | The comparison rate includes certain costs, so it allows a fairer side-by-side |
| Fixed period length | Determines how long the certainty lasts and when the revert rate applies |
| Revert rate | The rate you move to automatically when the fixed period ends |
| Ongoing fees (monthly or annual) | A lower rate with a higher fee is not automatically cheaper |
| Upfront or application fees | One-off costs affect the first-year comparison |
| Offset account and redraw availability | Affects how much interest you actually pay over time |
| Repayment flexibility (extra repayments, lump sums) | Often restricted during a fixed period |
| Break cost policy | Determines the cost of leaving or changing early |
The rate is not the whole cost
Moneysmart is explicit on this point: the home loan interest rate is not the only cost to compare. Fees, features and flexibility all change what a loan costs you in practice, and some of the most valuable features are the ones that quietly do not exist on a cheap product.
Two deserve particular attention.
Offset and redraw. Moneysmart explains that a mortgage offset account can reduce the interest you pay on your home loan, and suggests considering whether it is worth having for your situation. An offset is worth far more to someone who keeps a large cash buffer than to someone who lives close to their balance. Because offset and redraw access is often different — or more restricted — on fixed-rate loans, this is a real point of difference rather than a marketing detail.
Break costs. Ending a fixed-rate period early — by refinancing, selling, or making a large extra repayment beyond what the contract allows — can trigger break costs. How these are calculated is lender-specific and depends on your contract, so treat any figure you see online as an illustration only. The practical step is to ask the lender, in writing, how break costs would be worked out on your loan and to ask for a worked estimate on the balance you are considering fixing. If the answer is vague, that is itself information.
Turn rates into repayments before you decide
A difference of a fraction of a percentage point reads as abstract until it is a monthly amount on your balance. Moneysmart provides tools that let you work out your home loan repayments and compare different rates, and to compare fixed and variable home loan rates directly. Run your own figures through a repayment calculator rather than reasoning from the rate gap alone, then re-run it using the revert rate to see what the fixed option becomes once the fixed period ends.
That second run matters. A fixed rate compared only against today's variable rate is a one-sided comparison; your actual choice is between the fixed period plus whatever follows it, and a variable rate that moves from now on.
Questions to put to the lender or broker
Ask these before you commit, and keep the answers with your snapshot:
- What is the revert rate at the end of the fixed term, and has it historically differed from the standard variable rate?
- Can I make extra repayments during the fixed period, and up to what limit?
- Does an offset account apply to the fixed portion, the variable portion, or neither?
- How are break costs calculated, and can you give me a worked example on my loan amount?
- Which fees are ongoing, and do any of them apply only after the fixed period?
- If I split my loan, are there separate fees for each portion?
If the answer to any of these changes between the phone call and the paperwork, ask again and get it in writing.
Next steps
- Write down your loan amount, deposit or equity, repayment type and remaining term.
- On one date, collect the fields in the table above for two to four fixed options and two to four variable options.
- Run your own balance through a repayment calculator at each rate, including the fixed option's revert rate.
- Ask the break-cost and offset questions in writing for the options still in contention.
- Re-check the rates before you apply, and note whether anything changed.
If you want to see current fixed and variable rates side by side, /money/home-loans/ is where to start; /match/ can help narrow the list to lenders whose features fit the way you plan to use the loan.
General information only. This article is general information about how to compare home loan rates, not personalised legal, tax, credit or financial advice, and not a recommendation of any lender or product. Rates, fees and product features change, and lender policies on break costs and revert rates differ by contract. Confirm current rates and the terms that apply to you directly with the lender or a licensed broker, and read the product's terms and conditions before you apply. Nothing here guarantees approval, a rate, or a particular saving. Sources used: Moneysmart (ASIC), Fixed vs variable home loan interest rates.