Fixed vs Variable Home Loan: The Real Lifetime Cost

The short answer

The lifetime cost of a fixed versus a variable home loan depends almost entirely on what happens to interest rates after the fixed term ends. A fixed rate in Australia typically only locks for 1–5 years, then reverts to a variable rate for the remaining 25-plus years. On a $600,000 loan over 30 years, a difference of just 0.24% p.a. changes total interest by roughly $33,000, and the rate you "revert" to after fixing can swing the lifetime figure by $90,000 or more. Since no one can know future rates, the honest comparison isn't "which is cheaper" but "how does each path play out under different rate assumptions", which is exactly what a calculator lets you test.

How fixed and variable actually work in Australia

A fixed-rate home loan locks your interest rate for a set period, commonly 1, 2, 3 or 5 years. Your repayments don't move during that term, which makes budgeting predictable but means you won't benefit if rates fall (Moneysmart). The catch is that the fixed term is almost always shorter than the loan, so at expiry the loan rolls onto a variable rate. That's often the lender's standard variable "revert" rate, which can sit above the sharpest advertised deals unless you renegotiate or refinance.

A variable-rate home loan moves up or down as the market changes, broadly tracking the RBA cash rate, though lenders don't always pass on changes in full. Variable loans usually allow unlimited extra repayments and offset accounts, and are easier to switch (Moneysmart).

Two more Australian specifics matter for lifetime cost:

• Break fees. Exiting a fixed loan early (to refinance or sell) can trigger a break cost. Generally, the more rates have fallen since you fixed, the larger the fee (Moneysmart).
• Split loans. You can fix part and leave part variable (say 50/50), getting some certainty while keeping offset and extra-repayment flexibility on the variable portion.

As of the 2025–26 financial year, fixed and variable rates have been broadly similar. Owner-occupier variable rates have averaged around the high-5% range, with shorter fixed terms often advertised slightly lower. Always check current rates with lenders and the Moneysmart mortgage calculator; the numbers below are illustrative.

Worked example: $600,000 over 30 years

Assume a $600,000 loan, 30-year term, principal & interest, monthly repayments, and an 80% LVR (so no LMI applies, since True Loan sets the LMI premium to zero at or below 80% LVR).

Path A — Variable, held steady at 5.93% p.a. for the whole loan

• Monthly repayment: $3,570
• Total interest over 30 years: ~$685,000

Path B — Fixed at 5.69% p.a. for 3 years, then variable

During the fixed term: monthly repayment $3,479, and the balance falls to about $575,200 after 3 years. What happens next is the whole story:

After the 3-year fix, the rate becomes…	New monthly repayment	Total interest over the full 30 years
6.50% p.a. (a higher revert rate)	~$3,771	~$747,000
5.93% p.a. (similar to variable)	~$3,646	~$685,000
5.50% p.a. (you renegotiate lower)	~$3,412	~$631,000

The fix itself saved a little up front ($3,479 vs $3,570 a month). But the lifetime outcome ranges from about $631,000 to $747,000 in interest, a ~$116,000 spread, driven entirely by the rate you land on after the fixed period. That's why "fixed is cheaper" or "variable is cheaper" claims are unreliable: the revert rate, not the headline fixed rate, dominates the lifetime figure.

(All figures rounded; calculated with standard amortisation. True Loan also supports true-periodic fortnightly repayments, where paying half the monthly amount every fortnight squeezes in the equivalent of a 13th monthly payment each year and cuts both interest and term.)

Model this in True Loan

True Loan is built for exactly this comparison. It walks one amortisation schedule that can change rate part-way through, so a fixed→variable rollover is a native feature rather than a guess.

1. Open the True Loan calculator and enter your loan amount, term and deposit (the LVR and any LMI estimate update automatically).
2. For a fixed loan, set the fixed rate and fixed period, then set the variable rate it reverts to: try an optimistic, a flat, and a pessimistic revert rate.
3. Read off total interest and total cost over the life of the loan for each.
4. Use the side-by-side comparison tool to put a pure-variable scenario next to a fix-then-revert scenario, or to test a split loan (two tranches, fixing one and leaving one variable). Every scenario is shareable via its URL.

Switch the repayment frequency to fortnightly to see the true-periodic effect, and add an offset balance to see how a variable loan's flexibility changes the lifetime number.

Common questions and mistakes

Is a fixed rate locked for the whole 30 years? No. In Australia fixed terms are typically 1–5 years, then the loan reverts to variable. Comparing a 3-year fixed rate against a 30-year variable rate as if they're the same horizon is the most common mistake.

Will I always save by fixing if rates rise? Only during the fixed term. If you revert to a high standard variable rate and don't renegotiate, the saving can be wiped out, so model the revert rate explicitly.

Can I make extra repayments on a fixed loan? Often only up to a capped amount, and breaking early may cost a break fee. Variable loans usually allow unlimited extra repayments and offset.

What's the safest hedge? A split loan gives partial certainty and partial flexibility; see how a split home loan works. And read what happens when a fixed rate expires before you fix.

For the underlying lifetime-interest mechanics, see total interest on a $600k loan over 30 years.

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These figures are estimates for general information only, not financial or credit advice. Rates change, and break fees and revert rates vary by lender. Check current rates and your own contract, and confirm specifics with your lender and moneysmart.gov.au.