Knowledge Centre

Why 98% of borrows are going variable right now

5/11/2024

The vast majority of home loan customers are currently choosing variable-rate loans over fixed-rate loans.

In August 2024, 98% of new loans were variable, while only 2% were fixed, according to the most recent data from the ABS.

By comparison, in August 2021, when interest rates were at record-low levels, 46% of borrowers decided to fix, while 54% went variable.

Interest rate expectations appear to be guiding borrowers’ decisions.

In 2021, when rates were at ultra-low levels due to the pandemic, most borrowers assumed they would rise sooner or later – so many chose to lock in those lower rates.

Today, most borrowers assume rates have peaked, so they want a variable loan that will get cheaper if and when the Reserve Bank of Australia starts reducing the cash rate.

Fixed vs Variable

1. Fixed loans simplify budgeting, because your monthly repayments won’t change during the fixed period.
2. As a result, you won’t suffer when rates rise and won’t benefit when they fall.
3. Variable loans are unpredictable, because your repayments can change at any time.
4. Variable rates go higher when rates rise and lower when they fall.