Fixed or variable home loans: Where are interest rates right now?

Woman sitting on floor looking at laptop, calculator and documents to compare fixed and variable home loan rates.

Home loan interest rates have been a hot topic since the Reserve Bank of Australia (RBA) cut the cash rate to a historic low of 0.10% last year (where it’s held steady since), leading to a flurry of mortgage rate reductions.

Cuts persisted across the board into 2021, attracting more borrowers despite rising property prices. But by mid year we started seeing a number of banks and lenders push fixed rates back up. 

In more recent months this trend has gathered momentum, with fixed rates – especially longer terms – steadily increasing. For example, the average 4-year fixed rate in the Mozo database for owner occupiers with an 80% loan to value ratio (LVR) is now 3.08% p.a. up from 2.37% p.a. in March. And considering the number of fixed rate hikes we’re seeing even more recently – Mozo recorded 64 lenders increasing rates in the last month compared to just 4 that reduced – it’s likely that figure will continue to rise.

Meanwhile, our research team has seen a huge volume of variable home loans rate cuts, with 36 lenders reducing variable rates over the last month alone. An average variable loan now comes with a 3.07% p.a. interest rate. While this is very close to the fixed 4-year offer, the lowest available rates across fixed and variable terms are where things have started to divert significantly. 

The best variable rate in Mozo’s database**, Reduce Home Loan’s Super Saver Variable, is now sitting at 1.77% p.a (1.86% p.a. comparison rate*). The lowest 4-year fixed rate tracked by Mozo** comes from BankVic and is markedly higher at 2.49% p.a. (3.49% p.a. comparison rate*). 

The changes to home loan rates could be linked to predictions that the RBA will lift the cash rate sooner than expected (i.e. before 2023). Thus, lenders are effectively pushing for borrowers to choose variable rates which they can increase in line with a cash rate rise, rather than fixed rates which will remain the same (and potentially more competitive) for the relevant term despite market shifts.

There are a number of benefits specific to variable or fixed home loans – like flexibility to make extra repayments and money saving features like offset accounts. These factors should certainly be considered when you’re comparing home loans. 

However, a few percentage points in interest can make quite a difference when you’re paying off something as significant as a home loan. So it’s definitely worth researching rates and considering options that suit you now and (ideally) in the long term. 

To help you get started, we’ve rounded up a couple of fixed and variable home loans that all sit under the 2% interest rate mark right now.

Fixed home loans under 2%

Australian Mutual Bank Fixed Rate Home Loan
  • 1.98% p.a 3-year fixed rate (2.59% p.a. comparison rate*)
  • Free redraw facility and extra repayments
Find out more

Lock in this great 3-year fixed rate with Australian Mutual Bank and you’ll be able to make up to $20,000 in extra repayments a year and freely redraw on those funds if need be. You can pay down your loan in weekly, fortnightly or monthly instalments and won’t have to worry about ongoing service fees (remember there is a $250 application fee and $180 discharge fee).

Tic:toc Fixed Home Loan
  • 1.99% p.a. 2-year fixed rate (1.92% p.a. comparison rate*)
  • Optional offset account
Find out more

This 2-year fixed rate option from Tic:toc presents great value as well as handy features like flexible repayment periods, free extra repayments (up to $20,000 annually) and redraws. There’s also the option to include an offset account which can help reduce the amount of interest you pay on your loan, although this is an add-on and comes with a $10 monthly fee. The only other mandatory fee on this mortgage is the $325 discharge fee.

UHomeLoan (1 Yr Fixed)
  • 1.79% p.a. 1-year fixed rate rate (2.18% p.a. comparison rate*)
  • No upfront or ongoing fees

UBank is offering a very competitive offer on its 1-year fixed loan. Right now the loan has no mandatory set-up or ongoing fees, as the $395 establishment fee is being waived on loans settled by 30 September, 2022. It also features free extra repayments (up to $20,000 a year), flexible repayment periods and a solid revert rate of 1.99% p.a.

Variable home loans under 2%

Reduce Home Loans Super Saver Variable
  • 1.77% p.a. variable rate (1.86% p.a. comparison rate*)
  • Free repayments and redraws
Find out more

The Reduce Home Loans Super Saver Variable currently offers the lowest variable rate in the Mozo database at 1.77% p.a. (1.86% p.a. comparison rate*) for LVRs up to 80%. It still offers good flexibility with unlimited free extra repayments and redraws and the option to split the account across a fixed loan. However, there are a few upfront costs you’ll need to budget for, including an application fee ($440), legal fee ($330), valuation fee ($250) and settlement fee ($150).

Well Home Loans Well Balanced
  • 1.85% p.a. variable rate (1.88% p.a. comparison rate*)
  • Split loan option

There’s more hot variable rate competition with the Well Home Loans Well Balanced mortgage. Interest rates start as low as 1.85% p.a. (1.88% p.a. comparison rate*) for owner occupiers paying back principal and interest on a loan with an LVR of 80% or less. It also comes with those useful features like free extra repayments and redraws, plus the option for a split account. There are a few one-off costs to consider though, including a $250 application fee, $150 settlement fee, a $385 legal fee and $300 discharge fee.

If you’re keen to investigate more affordable mortgage options, check out some of the cheapest home loans of 2021.

**Rates according to the Mozo database at the time of publishing.

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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