Should You Fix Your Mortgage in 2026? What Borrowers Need to Know Before Locking in a Rate
Interest rates have been one of the biggest talking points in the property market over the past few years. Every time the Reserve Bank moves the cash rate, it sparks the same question from homeowners and buyers:
“Should I just fix my mortgage?”
It’s a fair question. When rates feel uncertain, the idea of locking in a repayment and knowing exactly what you’ll be paying for the next few years can feel comforting.
But fixing a home loan isn’t always the obvious move people think it is.
In fact, one of the things I often explain to clients is that fixed rates don’t exist in isolation. They’re heavily influenced by what banks expect interest rates to do in the future. And because of that, fixing your mortgage can sometimes mean paying more than you realise — or giving up flexibility you may need later.
Let’s break down how fixed rates actually work, when they make sense, and some of the traps borrowers should be aware of.
What Does Fixing Your Mortgage Actually Mean?
When you fix your home loan, you’re locking in your interest rate for a set period of time — typically between one and five years.
During that fixed period:
Your interest rate won’t change
Your repayments remain consistent
Market interest rate movements won’t affect your loan
For many borrowers, that certainty is appealing. If interest rates rise, your repayments won’t increase.
But the trade-off is that fixed loans often come with less flexibility than variable home loans.
Why Some Borrowers Choose Fixed Rates
There are a few reasons borrowers decide to fix their mortgage.
Repayment certainty
Some households simply prefer knowing exactly what their repayments will be each month. A fixed rate removes the uncertainty of future rate movements.
Protection against rising interest rates
If interest rates increase, borrowers with fixed loans are protected during their fixed period.
Peace of mind
For some people, eliminating uncertainty has real value. Budgeting becomes easier when repayments remain consistent.
For example, a family managing tight household cash flow may prefer locking in repayments rather than worrying about whether rates might increase again.
What Many Borrowers Don’t Realise About Fixed Rates
One of the most important things to understand is this:
Banks usually price fixed rates based on where they believe interest rates are heading.
In other words, banks are often ahead of the curve.
If markets expect interest rates to rise, banks will typically increase fixed rates before the actual rate rises occur.
So by the time borrowers start thinking about fixing their mortgage because they’re worried about rising rates, those fixed rates may already be higher than the current variable rate.
I’ve seen this play out very clearly before.
Earlier in my career I worked in financial planning. During that period, central banks around the world were injecting huge amounts of money into the financial system and interest rates had been pushed to historically low levels.
One of the things we were always taught was that when large amounts of money enter the system like that, it can eventually lead to inflation.
Because of that, I started thinking about what would happen when interest rates eventually began to rise again.
At the time I was exploring the idea of fixing my mortgage for as long as possible — ideally five years — to protect against that risk.
I came across a loan product offering a five-year fixed rate of around 2.5%.
Then something interesting happened.
Once the rate-rising cycle began, it only took one interest rate increase before that exact same loan product had jumped to around 5.5%.
In other words, the bank had already adjusted pricing dramatically in anticipation of future rate rises.
This is a good illustration of how fixed rates work. They aren’t simply based on today’s interest rates — they are heavily influenced by what banks believe rates will do in the future.
That doesn’t mean fixing is always a bad idea. In some situations it can make a lot of sense.
But it highlights why it’s important to understand how fixed rates are priced, rather than assuming they simply reflect the current rate environment.
Fixed vs Variable Home Loans in 2026
When deciding whether to fix your mortgage, it’s helpful to understand the key differences between fixed and variable home loans.
Fixed Home Loans
Fixed loans provide certainty.
Your interest rate stays the same for the fixed term, which means your repayments won’t change during that period.
However, fixed loans often come with less flexibility, particularly when it comes to refinancing, making large extra repayments, or restructuring the loan.
Variable Home Loans
Variable loans move with interest rates.
If the Reserve Bank increases the cash rate, lenders may increase variable rates. If rates fall, variable loans may become cheaper.
Variable loans also tend to offer more flexibility, including:
Offset accounts
Unlimited extra repayments
Easier refinancing
Access to equity
Because of this flexibility, many borrowers choose to remain on variable rates or use a combination of both.
The Biggest Traps When Fixing Your Home Loan
Fixing a mortgage can absolutely make sense in the right situation. But over the years I’ve also seen borrowers run into problems because they didn’t fully understand the trade-offs.
Here are some of the most common traps.
Fixing the Entire Loan
One of the biggest mistakes I see is borrowers fixing 100% of their mortgage.
On the surface it feels like the safest option. If rates rise, the entire loan is protected.
But fixing the whole loan also removes almost all flexibility.
If your circumstances change — perhaps you want to refinance, restructure the loan, access equity, or sell your property — you may face break costs that can run into thousands of dollars depending on the loan size and remaining fixed term.
Fixing for Too Long
Another trap is locking into a fixed rate for a long period simply because it offers the lowest rate available.
Five-year fixed loans can look attractive when rates are low, but they also create the longest period of inflexibility.
Life changes faster than people expect. Jobs change, families grow, people move homes, and investment opportunities arise.
When your loan is locked in for several years, it can limit your ability to adapt if your plans change.
Ignoring Offset Accounts
Offset accounts are one of the most powerful features available on variable home loans.
They allow your savings to reduce the interest charged on your mortgage while still keeping your money accessible.
However, many fixed home loans either:
Don’t offer offset accounts
Or offer limited versions of them
For borrowers who maintain large savings balances, this can be a significant trade-off.
Making Fear-Based Decisions
Interest rate headlines can create a lot of anxiety.
When rates start rising quickly, borrowers often feel pressure to lock in a rate immediately to avoid further increases.
But by the time many people make that decision, fixed rates have often already increased significantly, because banks adjust them in anticipation of future movements.
In other words, borrowers sometimes fix their mortgage after much of the adjustment has already happened.
Focusing Only on the Interest Rate
Another trap is focusing only on the interest rate itself rather than the overall structure of the loan.
A slightly lower rate might look appealing, but if the loan removes flexibility, limits offset options, or creates expensive break costs, the long-term impact can outweigh the short-term savings.
This is why the conversation shouldn’t just be about “What’s the lowest fixed rate available?”
It should also be about how the loan fits into your broader financial plans.
Why Many Borrowers Choose a Split Loan
One strategy that has become increasingly common is splitting the loan between fixed and variable rates.
A split loan simply divides the mortgage into two portions:
Part fixed
Part variable
This can create a balance between certainty and flexibility.
For example, a borrower might fix 50% of their loan to protect against rate increases while leaving the other half variable to maintain offset account benefits and repayment flexibility.
It’s not the right solution for everyone, but it can provide a practical middle ground for borrowers who are uncertain about where rates are heading.
So… Should You Fix Your Mortgage in 2026?
There isn’t a one-size-fits-all answer.
The right decision depends on several factors, including:
Your tolerance for interest rate changes
Your household cash flow
Your future plans for the property
How important flexibility is to you
In some situations, fixing part or all of a mortgage can provide valuable certainty.
In others, staying variable — or using a split loan — may provide greater flexibility and long-term benefits.
One thing I often remind clients is this:
Choosing the right loan structure can matter more than simply chasing the lowest interest rate.
A well-structured mortgage should support your broader financial goals, not just your next repayment.
Final Thoughts
Interest rates will always move in cycles. Trying to perfectly predict them is incredibly difficult.
What matters more is making sure your mortgage structure gives you the right balance of certainty, flexibility, and long-term strategy.
For some borrowers, fixing their mortgage will provide peace of mind.
For others, flexibility may prove far more valuable.
The key is understanding how each option works before making a decision.
💬 Use the contact form, or book a meeting to review your mortgage structure and explore whether fixing, staying variable, or splitting your loan makes the most sense for your situation.
