Fixed vs Variable Mortgage 2026: Which Saves You More After Two Rate Hikes
After back-to-back RBA hikes to 4.10%, should you fix your mortgage or stay variable? We compare current fixed rates (5.99-6.49%) vs variable (6.20-6.80%), run a break-even analysis on a $600K loan, and show exactly when fixing wins and when it doesn't.
Fixed vs variable after two RBA hikes: the numbers right now
As of March 18, 2026, the RBA cash rate sits at 4.10% following two consecutive 25 basis point hikes in February and March. Variable mortgage rates from major lenders have moved up accordingly and now sit between 6.20% and 6.80%, depending on your lender, LVR, and whether you are an owner-occupier or investor. Fixed rates tell a different story. The best 1-year fixed rates from major and second-tier lenders range from 5.99% to 6.29%. Two-year fixed rates sit between 5.89% and 6.19%. Three-year fixed rates range from 5.69% to 5.99%. These fixed rates are priced below current variable rates because the market expects the RBA to start cutting again within 12 to 18 months — fixed rates reflect where markets think the average variable rate will be over the fixed term, not where it is today. The gap between the best variable rate (around 6.20%) and the best 2-year fixed rate (around 5.89%) is approximately 0.31 percentage points. On a $600,000 mortgage, that gap translates to roughly $110 per month or $1,320 per year in repayment savings by fixing.
Worked example: $600,000 loan — fixed vs variable over 2 years
Take a $600,000 principal-and-interest mortgage with 25 years remaining. Scenario 1 — stay variable at 6.50% (a mid-range rate after the March hike). Your monthly repayment is approximately $4,070. If the RBA hikes again by 25bp in May (bringing variable to 6.75%), your repayment rises to approximately $4,166. If rates then plateau and the RBA starts cutting in early 2027 — say two 25bp cuts bringing variable back to 6.25% — your average monthly repayment over 24 months is roughly $4,090. Total repayments over 2 years: approximately $98,160. Scenario 2 — fix at 5.99% for 2 years. Your monthly repayment is locked at approximately $3,874 for the full 24 months regardless of what the RBA does. Total repayments over 2 years: approximately $92,976. The difference: fixing saves you approximately $5,184 over two years in this scenario. However, if the RBA cuts more aggressively — say 100bp of cuts through 2027 bringing variable down to 5.50% by the end of your fixed term — the variable borrower pays less in the back half and the total gap narrows significantly. The fixed borrower also cannot make unlimited extra repayments during the fixed period (most lenders cap extra repayments at $10,000-$30,000 per year on fixed loans), reducing the long-term interest saving from additional payments.
The break-even analysis: when does fixing actually win?
The break-even point is the variable rate path where fixing and staying variable produce the same total cost. For a 2-year fix at 5.99% versus a starting variable rate of 6.50%, fixing wins if the average variable rate over those 2 years stays above approximately 6.00%. Given the current rate is already 6.50% and markets are pricing a 40% chance of another hike in May, the average variable rate would need to fall rapidly and substantially for variable to beat fixing. Specifically, variable would need to drop below 5.50% within 12 months and stay there — which would require at least four 25bp RBA cuts by early 2027. Most economists are forecasting a peak cash rate of 4.10-4.35% and then a gradual easing cycle, with one to three cuts through 2027. Under median forecasts (two 25bp cuts in the second half of 2027), fixing at 5.99% for 2 years comes out ahead by $3,000 to $5,000 on a $600K loan. For a 3-year fix at 5.79%, the break-even is lower because you are locked in longer. Variable needs to average below about 5.80% over 36 months for variable to win, which requires a more aggressive easing cycle — possible but not the base case.
When fixing your mortgage makes sense
Fixing is the right move in several specific situations. First, if your household budget is tight and you cannot absorb another rate rise. Fixing gives you repayment certainty — you know exactly what you owe each month for the fixed term, which is invaluable for families already stretched by the 50bp of hikes in February and March. Second, if you believe rates will stay elevated or go higher before they come down. If the RBA delivers another hike in May (taking the cash rate to 4.35% and variable rates toward 7%), a 2-year fix at 5.99% looks increasingly attractive. Third, if you plan to hold the property and the loan for the full fixed term without selling, refinancing, or making large extra repayments. Break costs on fixed loans can be substantial if rates fall during your fixed period — potentially tens of thousands of dollars on a large loan. Fourth, if you want to lock in a known rate that is genuinely below current variable rates. The current environment is unusual in that fixed rates are lower than variable rates, which only happens when markets expect rates to fall. You are effectively locking in the market's consensus view of future rates.
When staying variable is the better choice
Variable wins in a different set of circumstances. First, if you are making significant extra repayments. A borrower putting an extra $500 per month into their variable loan on a $600,000 mortgage saves approximately $115,000 in total interest and cuts 7 years off the loan term. Fixed loans restrict extra repayments (typically $10,000-$30,000 per year), so aggressive repayers lose this advantage. Second, if you have a large offset account balance. Variable loans with offset accounts reduce the interest-bearing principal by the offset balance. If you have $80,000 in offset against a $600,000 loan at 6.50%, your effective interest is calculated on $520,000 — saving approximately $5,200 per year. Fixed loans rarely come with offset accounts, and when they do, the fixed rate is typically higher to compensate. Third, if you may sell or refinance within the next 1-3 years. Breaking a fixed loan early triggers break costs calculated on the remaining term and the rate differential. On a $600K loan with 18 months remaining on a fix, break costs could range from $3,000 to $15,000 depending on how much rates have moved. Fourth, if you believe the RBA will cut rates faster and deeper than markets currently expect. If the economy weakens sharply and the RBA delivers 100-150bp of cuts through 2027, variable borrowers ride those cuts down immediately while fixed borrowers are locked out of the benefit.
Split loan strategy: the middle ground that works for most borrowers
For borrowers who are genuinely uncertain about the rate outlook — which is most people — splitting the loan between fixed and variable is the pragmatic approach. A common split is 60% fixed and 40% variable. On a $600,000 loan, that means $360,000 fixed at 5.99% (repayments of approximately $2,324/month) and $240,000 variable at 6.50% (repayments of approximately $1,627/month), for a combined total of approximately $3,951/month. This gives you several advantages. The fixed portion provides certainty on the majority of your repayment. The variable portion retains the offset account benefit and allows unlimited extra repayments. If rates go up, 60% of your loan is protected. If rates fall, you benefit immediately on 40% of your loan. And if you need to refinance or sell, break costs apply only to the fixed portion ($360K), not the full $600K. The optimal split depends on your situation. If you have a large offset balance, lean more heavily toward variable. If cash flow certainty is your priority, lean more heavily toward fixed. Most lenders will let you split your loan at no additional cost — it is simply two loan accounts secured against the same property.
How to negotiate the best fixed or variable rate today
Do not accept your lender's standard advertised rate — there is almost always room to negotiate. The gap between the highest and lowest variable rates among major lenders in March 2026 is approximately 0.60 percentage points, and for fixed rates the spread is around 0.40 percentage points. On a $600K loan, 0.40% translates to approximately $148 per month. Start by checking the lowest rates available from comparison sites and note the specific lender and product. Call your current lender's retention team (not the general line) and tell them you are considering refinancing to a competitor offering a specific lower rate. Most lenders can reduce your rate by 0.20 to 0.50 percentage points through a discretionary discount without you switching. If they will not match, actually refinancing is straightforward — the new lender handles most of the process, and many cover switching costs. Cashback offers of $2,000-$4,000 are still common for loans above $250,000. Use our Mortgage Calculator to compare total costs under different rate scenarios, and our Borrowing Power Calculator to confirm your borrowing capacity if you do decide to refinance.
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General information and estimates only — not financial, tax, or legal advice. Always verify with a licensed adviser or the ATO.
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