Which Is Best: Fixed Or Variable Interest Rate?

People usually dream big and want a well-settled life. One of the most important assets that comes with being well-settled is buying your own home. Everybody dreams of buying their own home. However, the current inflation and soaring prices are making it difficult for individuals to buy homes. Hence, they are opting for home loans in Sydney. A loan helps a person to buy a home without causing too much financial burden.

Loans are quite a suitable option as you don’t need to pay the whole cost upfront and can pay according to the loan term. The main factor when choosing a loan is whether you should opt for a fixed interest rate or a variable interest rate. Read the article to find out which option is the best for you as we discuss the pros and cons of both. 

Fixed Interest Rate

As the name suggests, a fixed interest rate means the rate of interest for your loan will remain the same or unchanged for the entire loan duration, irrespective of market fluctuations. You must consult with the best finance broker in Sydney when opting for such loans. The interest rate keeps fluctuating in the market, but if you take a loan when the interest is low, you will pay a low-interest rate throughout the loan duration. This is because the interest rate on loans depends on the prevailing market condition. So, if the interest rate is low when you take a loan, it will remain low, whereas if it is high, then it will remain high. 

Pros Of Fixed Interest Rate

  • Borrowers are aware of the payments they need to make till the end of their loan term. 
  • It makes saving easy, as you know the exact interest to be paid.
  • You can select the duration for which you want to take a home loan in Sydney. You can also take other loans and set a time frame ranging from 6 months to a maximum of 10 years. The interest rate will remain the same over the long term.

Cons Of Fixed Interest Rate

  • It can be more expensive than variable-interest loans.
  • The interest rate does not decline with the decline in the market. 
  • You may have to pay extra fees if you want to change the loan or exit it before the loan term. 
  • These interest rates are less flexible as compared to variable interest rates. 

Variable Interest Rate

In a variable interest rate, the rate of interest on a loan is not fixed and may change with the change in the market. The government sets the standard interest rate, also called the federal funds rate and depending on this rate, the interest rate may increase or decrease. Hire the best finance broker in Sydney to learn everything about variable interest rates and whether they will suit you. The interest rate in this type of term may keep changing, especially if both principal and interest are paid. 

Pros Of Variable Interest Rate

  • You may enjoy initial perks such as a lower rate of interest for some time during the start of the loan.
  • The loan repayments may decrease with a decline in the market. 
  • The interest rate is generally lower than the fixed-interest rate loan, especially at the start when you take the loan. 

Cons Of Variable Interest Rate

  • You may not be able to plan expenses better, as interest rates are uncertain for the whole loan duration. 
  • It can be expensive if the rates continue to increase. 
  • Risks of being overcapitalised or being at repayment capacity. Both can cause huge financial burdens; thus, consult the best finance broker in Sydney before opting for such loans.
  • The interest rate increases with an increase in market rates.  

Which Is The Best: Fixed Or Variable Interest Rate?

Both fixed and variable interest rates loans have their own set of advantages and disadvantages. However, to determine which one of them is the best depends on multiple factors. These factors include your personal income, loan term, interest rate trends and forecast, financial standings and more. It is best to consult with a professional when opting for a home loan in Sydney and choosing between fixed and variable interest rates. 


Both fixed and variable interest rates are a good choice, but which is the best among the two? It depends on your personal situation, condition, requirements, income, market fluctuations and more. The need may change from one individual to another. Thus, it is best to consult the right finance broker in Sydney to choose the one that best suits your requirements.

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