How to choose after the RBA's rate cuts - without making a decision based on market speculation.
The most common question in our Oran Park office through the first half of 2026 has been some version of: should I fix now? The RBA has cut rates, variable rates have come down 0.5% to 1.0% from their late 2024 peaks, and the instinct to lock in before rates "go back up" is understandable. But the instinct conflates two separate questions: where will rates go, and what loan structure suits your financial situation right now. The first question is unanswerable. The second is the one worth working through carefully.
The RBA began cutting the cash rate in early 2026 following a sustained period of inflation reduction. Variable rates from major lenders are sitting in the 5.5% to 5.8% range in mid-2026 - down from peaks of 6.2% to 6.5% in late 2024. Fixed rates are priced differently. They are determined by the bank bill swap rate (BBSW) and interest rate futures, which reflect the wholesale money market's expectation of where variable rates will be over the fixed term.
This is the critical point: fixed rates already incorporate the market's expectation of future cuts. If the market expects rates to fall by another 0.5% over the next two years, 2-year fixed rates will already reflect that expectation. You are not "locking in before the market moves" - the market has already moved. Fixed rates in mid-2026 are broadly comparable to variable rates precisely because the market has priced in the anticipated rate path.
Fixing your rate provides certainty. Your monthly repayment is known for the fixed term - 1, 2, 3, or 5 years depending on which term you choose. For a household managing a tight budget in Narellan or Gregory Hills where the mortgage is the largest single expense, that certainty has real value. You can plan around a known number. The risk of an unexpected rate increase does not apply during the fixed period.
For a $750,000 loan on a 2-year fixed rate of 5.6%, the monthly repayment is approximately $4,323 on P&I over 30 years. You know that number will not change for 24 months regardless of what the RBA does at its monthly board meetings. That is not a small thing when household cash flow is the constraint.
Fixing comes at the cost of flexibility. Three costs are worth understanding clearly:
The historical pattern: Borrowers who fix at the bottom of a rate cycle - after cuts have already been delivered - historically pay more total interest than those who stayed variable. This is not a guarantee about the future, but it reflects how fixed rate pricing works: it incorporates expected cuts before they happen. Acknowledging this pattern is not advice to stay variable; it is context for the decision.
The most common structure for borrowers who want some certainty without sacrificing all flexibility is a split loan: fix a portion of the loan and keep the remainder variable with a full offset account. A typical split might be 60% fixed, 40% variable - or 70/30 depending on the borrower's priorities.
On a $800,000 loan, a 60/40 split gives you $480,000 on a fixed rate with known repayments, and $320,000 on a variable rate with offset functionality. The offset account can be used to reduce the interest-bearing variable balance - meaning your savings actively reduce your interest bill - while the fixed portion provides repayment stability. The split structure is not universally better than either a fully fixed or fully variable loan, but it addresses the most common trade-off: certainty versus flexibility.
The clearest case for fixing in mid-2026 is a household with a fixed income - both earners on salary, no variable income components - where the current fixed rate is within 0.1% to 0.2% of the best available variable rate, and where the monthly certainty of a known repayment is operationally valuable for budgeting. If that household is also not relying on offset functionality for debt reduction, the argument for fixing is straightforward.
Investors who are using an offset account as part of a debt recycling structure - directing cash flow from the investment property to offset against the owner-occupied home loan - will typically find that locking either loan into a fixed rate without offset disrupts the mechanics of the strategy. The flexibility premium of the variable product is worth paying in that context.
A cohort of buyers who purchased in Narellan, Oran Park, and Gregory Hills during 2024 and 2025 may have fixed at 6.0% to 6.5% - the rates available at the time of purchase. Those fixed terms will expire in 2026, 2027, or 2028. If your fixed term is approaching expiry, the three months before it ends is the window to act. The lender's revert rate - the rate the loan automatically moves to when the fixed term expires - is invariably not the most competitive rate available. A broker comparison at that point can identify whether refinancing to a new lender, or negotiating with the existing lender, produces the better outcome. The comparison rate on the new product and the one-off cost of refinancing (discharge fees, application fees) need to be run against the ongoing interest saving to establish whether the switch is worthwhile.
The key question to ask: What is the comparison rate on the fixed product versus the variable, and what are the break cost terms if I need to exit early? Both answers are required before making the decision.
Yes, but the break cost may be significant. Break costs on fixed rate loans are calculated as the lender's economic loss from having to re-lend the funds at a lower market rate for the remaining fixed term. In a falling rate environment, those costs are highest because the rate differential is widest. A borrower who fixes at 5.8% and then wants to break when rates fall to 5.2% in 12 months' time will face a break cost calculated on the difference between their fixed rate and the current wholesale rate for the remaining fixed term - potentially $10,000 to $30,000 on a $700,000 loan. Always request an indicative break cost calculation from your lender before deciding.
Waiting for more cuts before fixing is a form of rate speculation. Fixed rates are priced off wholesale swap rates, which already incorporate the market's expectation of future RBA moves. If the market expects two more cuts, fixed rates already reflect that expectation - waiting for those cuts to be announced will not necessarily produce a lower fixed rate, because the market has already priced them in. The decision to fix should be based on your financial circumstances and repayment certainty needs, not on predicting whether rates will fall further.
Do not wait until the fixed rate expires and automatically roll onto the lender's revert rate, which is typically one of the highest rates on offer. Three months before expiry is the right time to review. Start by getting your current lender's revert rate and any retention offer. Then ask your broker to compare the full market - including other lenders - to determine whether staying or refinancing produces the better outcome over your expected hold period. Factor in any discharge and application fees when running the comparison.
Whether you purchased in Oran Park two years ago on a fixed rate that is about to expire, or you are a new buyer weighing fixed against variable for the first time - we can run the full comparison across our 30+ lender panel and give you the numbers you need. The conversation is free and takes 30 minutes.
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