The RBA raised the cash rate to 3.85% in February 2026, and three of the four major banks are forecasting another hike in May. If you're deciding between a fixed and variable home loan rate right now, that context matters. Here's how to think through it.

What Is a Fixed Rate Home Loan?

A fixed rate locks your interest rate for a set period, typically one to five years. During that time, your repayments don't change regardless of what the RBA does.

The benefit is certainty. You know exactly what you're paying each month, which makes budgeting easier and removes the anxiety of watching rate announcements.

The trade-off is flexibility. Fixed rate loans generally cap how much extra you can repay without incurring break costs. If your circumstances change and you need to exit the loan early, the fees can be significant. Most fixed loans also don't include an offset account, which is one of the most useful features available on variable loans.

What Is a Variable Rate Home Loan?

A variable rate moves with the market. When the RBA raises or cuts the cash rate, your lender typically adjusts your rate within days.

Variable loans tend to come with more features: offset accounts, unlimited extra repayments, redraw facilities. These can save you a meaningful amount of interest over the life of the loan if you use them well.

The downside is uncertainty. When rates go up, your repayments go up. In the current environment, that's not a hypothetical. If another hike hits in May, variable rate borrowers will feel it immediately.

What's Happening with Rates in 2026?

The RBA's February 2026 decision to hike the cash rate to 3.85% marked the first increase in over two and a half years. The stated reason: inflation has not fallen as quickly as expected, particularly in services like rent, insurance, and healthcare.

Three of the four major banks currently forecast another 0.25% hike in May 2026, which would take the cash rate to 4.10%. Beyond that, the outlook depends on how quickly inflation comes under control.

Fixed rates, it's worth noting, already reflect market expectations. Lenders price fixed rates based on where they expect rates to go, not just where they are today. This means that if the market already expects further hikes, that's likely baked into the fixed rates you're being offered right now.

Which Is Better for You Right Now?

There's no universal answer. It depends on your situation.

Fixed might suit you if: you need budget certainty, you're on a tight monthly cash flow, or the idea of another rate hike hitting your repayments would cause genuine financial stress. Fixing removes that variable and lets you plan ahead.

Variable might suit you if: you have an offset account you're actively using, you're making extra repayments and want the flexibility to do so, or you believe rates may fall again before too long and don't want to be locked into a rate that becomes uncompetitive.

A split loan is also worth considering. Many lenders allow you to fix a portion of your loan and keep the rest variable, giving you some repayment certainty without sacrificing all your flexibility. This approach suits borrowers who want a bit of both.

What Most People Get Wrong

The most common mistake is treating the fixed vs variable decision as a bet on where rates are going. It's not. You're not trying to predict the market. You're trying to structure your loan in a way that suits your cash flow, your goals, and your tolerance for change.

If you fix and rates fall, you'll pay more than you would have on variable. If you stay variable and rates rise again, your repayments will go up. Neither outcome means you made the wrong decision. It means you made a decision that was right for your situation at the time.

Get Advice Before You Decide

The fixed vs variable decision is worth talking through with someone who can look at your specific loan, income, and goals. The right structure for one borrower can be completely wrong for another, and the difference can cost or save you a meaningful amount over the life of your loan.

At Swish, we work through this kind of question with clients regularly. We'll look at your situation, explain the trade-offs clearly, and give you our honest recommendation rather than pushing you toward a product that suits us.

Book a free call with Swish to talk through your fixed vs variable home loan rate options in 2026.