With interest rates remaining elevated, many Australian borrowers are asking a more specific question than ever before:
Should I fix my entire loan, or split it?
Should I fix my entire loan, or split it?
And if I fix, for how long?
These are good questions. The right answer depends less on trying to predict the Reserve Bank of Australia and more on how you want your loan to behave over the next few years.
Option one: fixing 100% of your loan
A fully fixed loan gives you certainty. Your interest rate and repayments stay the same for the fixed period.
This approach may suit borrowers who:
- Prefer predictable repayments
- Have limited spare cash flow
- Want peace of mind during uncertain economic periods
The benefit is stability. The downside is flexibility. Fully fixed loans often:
- Limit extra repayments
- Restrict offset account use
- Attract break costs if you refinance early
Case study
Tom, a single-income household, fixed his entire loan for three years. Knowing his repayments would not change allowed him to plan household expenses confidently, even as rates continued to move.
Tom, a single-income household, fixed his entire loan for three years. Knowing his repayments would not change allowed him to plan household expenses confidently, even as rates continued to move.
Option two: splitting your loan (part fixed, part variable)
A split loan combines certainty and flexibility. Part of the loan is fixed, while the remainder stays variable.
This structure can work well if you want to:
- Lock in certainty for core repayments
- Keep flexibility for savings and extra repayments
- Use an offset account on the variable portion
Split loans are popular with Australian borrowers who want balance rather than an “all or nothing” approach.
Case study
Emma and Luke split their mortgage 60/40. The fixed portion covered essential living costs, while the variable portion allowed them to use an offset and make extra repayments when cash flow allowed. This reduced stress without locking them in completely.
So, how long should you fix for?
This is often the hardest decision — and where borrowers feel the most pressure.
Rather than trying to pick the “perfect” rate cycle, it helps to think in terms of life stages and certainty needs.
Here are some general considerations:
One to two years
- Suits borrowers expecting change (job move, refinance, upgrade)
- Lower risk of break costs
- Less long-term certainty
Three years
- A common middle ground
- Offers meaningful stability without long lock-in
- Popular for borrowers wanting breathing space
Four to five years
- Maximum certainty
- Suits borrowers with stable income and long-term plans
- Less flexibility if circumstances change
There is no universally “correct” term. The right duration aligns with your plans, not market predictions.
Common mistakes to avoid
- Fixing purely because rates are rising
- Fixing too long without considering future plans
- Fixing 100% and losing access to offset or flexibility
- Making decisions based solely on headlines
A fixed rate should support your life — not restrict it.
A smarter way to decide
Instead of asking, “Where will rates go?”, a better question is:
“How much certainty do I need, and how much flexibility do I want?”
“How much certainty do I need, and how much flexibility do I want?”
A good broker can:
- Model repayments under different fixed terms
- Compare 100% fixed vs split structures
- Stress-test your loan against future scenarios
The Dream Catchers Lending approach
At Dream Catchers Lending, we help Australian borrowers:
- Understand fixed and split loan options clearly
- Choose fixed durations aligned with their goals
- Build loan structures that reduce stress, not just interest
If you are considering fixing your rate — or wondering whether a split loan might suit you better — a conversation with a Dream Catchers Lending broker can help you make a confident, informed decision.