Introduction
Every homeowner faces the same question at some point: should I fix my mortgage rate, or stick with variable? Entering 2026, this decision is even more pressing. Westpac has forecast up to four Reserve Bank of Australia (RBA) rate cuts in the year ahead, sparking debate about whether borrowers should lock in a fixed deal now or ride the variable cycle lower.
For households in Sydney, Melbourne, Brisbane, Perth, Adelaide, Hobart, Canberra, and Darwin, the answer isn’t one-size-fits-all. It depends on your goals, your income stability, and your appetite for risk.
Where Rates Stand Right Now
- BOQ leads the market with a two-year fixed at 4.89%.
- NAB and ANZ are competing with two-year fixed rates around 5.19%.
- Variable rates still hover in the 5.5–6% range for many borrowers, but could fall if the RBA delivers the cuts predicted.
- According to Canstar, over 18 lenders now offer sub-5% fixed rates.
What Westpac’s Forecast Means
Westpac economists expect:
- Up to four RBA cuts in 2026, potentially lowering the cash rate to 3.6%.
- Variable mortgage rates could fall below 5.25% if banks pass on cuts.
- Fixed rates may continue to trend lower as lenders anticipate future moves.
This creates a conundrum: fix now and secure certainty, or float and wait for variable relief?
Fixed Rate Pros & Cons
Pros
- Certainty of repayments
- Protection against unexpected hikes
- Peace of mind for budgeting
Cons
- Less flexibility to refinance or switch
- Potentially higher than future variable rates if RBA cuts aggressively
- Break costs if you want to exit early
Variable Rate Pros & Cons
Pros
- Benefit from RBA cuts immediately
- Greater flexibility to refinance or restructure
- Often come with better features like redraw
Cons
- Uncertainty — repayments could change multiple times a year
- Banks don’t always pass cuts on in full or immediately
- Harder to budget if household income is tight
The Split Loan Strategy
Many brokers recommend a hybrid approach:
- Fix part of your loan for certainty (e.g., 50%)
- Leave the rest variable to take advantage of potential RBA cuts
This balances stability with opportunity — ideal for households in uncertain markets.
Capital City Insights
- Sydney: With the highest mortgages, even a 0.25% rate decision equals big dollar shifts. Splitting is popular here.
- Melbourne: Competitive refinancing offers make variable loans attractive.
- Brisbane: First home buyers benefit from certainty with partial fixed rates.
- Perth: Rising equity allows flexibility to experiment with split strategies.
- Adelaide: Affordable mortgages make fixing attractive for budget certainty.
- Hobart: Slower growth markets lean toward conservative fixed options.
- Canberra: Stable incomes allow borrowers to absorb variable changes.
- Darwin: Niche lenders provide flexible split structures.
Real Client Story: Claire in Sydney
“I couldn’t decide whether to fix or float. My broker suggested a split loan — half fixed at 4.95%, half variable. Now I’ve got peace of mind and flexibility. If rates fall, I still benefit.”
Practical Example
On a $500,000 loan:
- Fixed at 5% for two years = $2,923/month, stable.
- Variable at 5.6% now → could drop to 5.25%, lowering repayments to $2,774/month.
That’s a $149/month saving if the RBA cuts flow through. But the risk is timing — not all lenders pass on cuts in full or straight away.
Why Brokers Are Essential in 2026
- Compare 50+ lenders – not just the big four.
- Explain features – offset, redraw, break costs, and eligibility.
- Tailor advice – based on whether you’re separated, a first home buyer, or refinancing.
- Negotiate timing – securing deals ahead of market shifts.
Don’t Wait for “Perfect Timing”
Too many borrowers wait for the “perfect” deal and end up missing opportunities. With sub-5% fixed rates already here, cashback offers still available, and RBA cuts on the horizon, the best strategy is to act now with broker guidance.
📅 Book Your Free, No-Obligation Chat
At Money Tree Mortgage Brokers, we’ll help you decide whether to fix, float, or split — ensuring your loan strategy aligns with your financial goals for 2026. With access to 50+ lenders, we’ll find the right mix of certainty and savings.
