RBA hold confuses the home loan decision: Should you go fixed, variable or split?

By JP Pelosi · · 3 min read
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Two storey house
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With the Reserve Bank holding interest rates at 4.35% this March, how should home buyers now consider their home loan interest rate?

It can be tricky. The average variable home loan rate is currently 6.82% p.a., as per the Mozo database, but it seems likely to drop in the not too distant future. Though no one is certain when.

At a glance, variable home loan rates seem a bit high right now. Consider some of the options from major banks, such as CommBank’s Extra Home Loan at 6.79% p.a. (7.06% p.a. comparison rate), NAB’s Base Variable Rate Home Loan at 6.84% p.a. (6.88% p.a. comparison rate), ANZ’s Simplicity Plus Special at 6.64% p.a. (6.64% p.a. comparison rate) and Westpac’s Flexi First Option Home Loan Special at 6.54% p.a. (6.86% p.a. comparison rate).

There’s not a lot of variability here, so to speak. 

However, our recent Mozo Home Loan Report showed that smaller banks can save borrowers money with some much more attractive variable rates: G&C Mutual’s Essential Worker Home Loan offers 5.80% p.a. (5.83% comparison rate), Homeloans360’s Owner Variable Home Loan is at 5.89% p.a. (5.89% p.a. comparison rate) and Community First Bank’s Basic Variable Home Loan at 5.94% p.a. (5.99% p.a. comparison rate), for example.

Again, it’s hard to know if these rates will move. Could it be a better bet to fix for a short while?

The question of fixing: Fixed home loans in focus

There have been some good looking deals in fixed home loans of late. Though it’s hard to know if fixing for two or three years is worth the gamble.

Still, for argument’s sake, let’s consider a few of the better moves in early 2024. Take AMP Bank, which recently reduced rates for all of its fixed term home loans by up to 50 basis points, with its 3-year rate now coming in at 5.99% p.a. (6.68% p.a. comparison rate). Some competitors are offering even better on 3-year terms: for example, Bank Australia’s Clean Energy Option is now at 5.79% p.a. for 3 years (6.43% p.a. comparison rate), while Well Money has dropped its 3-year fixed rate to 5.89% p.a. (comparison rate 6.49% p.a.).

Both ING and Qantas Money also got in on the act recently, coming down on 3 years fixed to 6.12% p.a. (both comparison rates). Further still, one of the more impressive options right now is from Australian Mutual Bank which has a 5.48% p.a. fixed rate for 3 years (6.24% p.a. comparison rate. This is the leading 3-year fixed rate in the Mozo database and is among the best fixed rates all up.

But Mozo’s Home Loan Expert, Peter Marshall says there is a risk with fixing rate right now because if the RBA has it wrong and needs to cut hard later this year, these fixed options could leave homeowners paying much more than needed and for quite a while. 

“We've seen the RBA send a wrong message about the future of interest rates before, so we should not rule it out from happening again,” Marshall says.

“Banks are also very good at setting rates so that they do not lose. This means that those who have rates at 5.69% now believe that within three years rates will be lower than that - and possibly much lower. Never bet against the banks!”

Better to consider a split rate loan?

Notably, Mozo’s Home Loan Report found that 7% of borrowers don’t know their home loan type, despite it having a big impact on repayments. 

And yet, knowing how a loan works and getting a good interest rate only takes a bit of research. It also allows you to explore a few options, including the often forgotten 'split rate' home loan. When you have a split loan, one portion is charged interest at a variable rate, while the other portion is charged interest at a fixed rate.

So put simply, split rate home loans can be quite handy when borrowers face a tricky economy and uncertainty around interest rate movements. In a way, they offer borrowers a sense of stability and balance. They also give them the assurance of fixed rates while benefiting from potential variable rate cuts.

Marshall says split loans can certainly be a safer option, where you get the risks and benefits from both rate types. 

“My personal view is that rates will fall harder and faster than almost anyone is talking about right now,” Marshall says. 

If that’s the case, a split home loan might be the best way to play this currently unpredictable home loan landscape. 

If you're in the market for a home loan, let us help you do the heavy lifting. Our home loan experts handpick some of the best home loans on the market in an effort to make comparing interest rates and features easier. Start comparing below!

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can compare more home loans here.
Last updated 27 July 2024 Important disclosures and comparison rate warning*

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  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Neat Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.

  • Optimum Fixed Rate Home Loan

    • Owner Occupier
    • Principal & Interest
    Interest rate
    5.69 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,899
    Go to site

    Lock in a competitive interest rate and enjoy peace of mind for the fixed period. Available for owner occupied new and refinanced home loans with at least 20% deposit. Split option available as well as offset and redraw. Noapplication, ongoing or banking fees. Third Party fees may be applicable - payable within loan repayments. Extra repayments up to $20K per annum permitted. Apply online, 100% member owned credit union.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • OMG Home Loan

    • Owner Occupier
    • Principal & Interest
    • <60% LVR
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.02 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    BCU Bank’s OMG owner occupied home loan offers a variety of great low rates depending on your deposit. Save with no ongoing annual fees. Access your extra payments when you need to through the redraw facility. Pre-approval valid for 3 months.

  • Flex Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    5.99 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Competitive Fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

  • Express Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <90%
    Interest rate
    6.01 % p.a.
    Variable
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $3,001
    Go to site

    Get online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

  • Neat Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Flex Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.38 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Basic Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR<70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $10,000,000.

  • Offset Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR <70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.42 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.54 % p.a.
    Fixed 2 years
    Comparison rate
    7.10 % p.a.
    Initial monthly repayment
    $3,174

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

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