Most fixed versus variable advice you will read this year is answering a question the market already settled. It asks whether rates are about to fall, so you can decide whether to lock one in. In 2026 that framing is broken. The Reserve Bank has not been cutting. It raised the cash rate three times since the start of the year and then held at 4.35 per cent in June, with the Board saying openly it would lift again if it had to.
For a professional building a serious property portfolio, the fixed versus variable question was never really a bet on the next move anyway. It is a decision about flexibility, and about which of your loans you can still move when you need to. This article makes that case, with the current numbers, the mechanics the comparison sites gloss over, and a framework you can actually apply to a multi-property position.
The 2026 backdrop the standard advice ignores
Here is the setting, as of mid 2026, from the primary sources rather than the headlines.
The RBA cash rate target is 4.35 per cent. The Board held it there at its meeting on 16 June 2026, and that hold followed three increases earlier in the year. The statement was not the language of a central bank about to ease. It flagged that inflation was still too high, that an oil supply disruption was pushing prices up further, and that the Board would increase the cash rate again if required.
That matters for the fixed versus variable question because both of the usual scripts assume the opposite. “Lock in a low fixed rate before it climbs” assumes fixed pricing is still cheap and rising fast. “Stay variable and ride the rate down” assumes cuts are coming. Neither describes 2026.
Fixed pricing has already moved. New fixed mortgage rates fell through most of 2025, then started rising around the end of that year as tenor-matched swap rates lifted. By 31 May 2026 the average three-year fixed rate sat at about 6.73 per cent for owner-occupiers and 6.83 per cent for investors, according to the RBA’s own indicator lending rate series. Fixed is no longer the obvious discount it was during the pandemic, and the market is not pricing a clear path lower.
So the reflex of choosing based on where you think rates are headed is close to useless right now. Even the RBA is telling you the direction is uncertain and skewed to the upside. If the rate call is a coin toss, the decision has to rest on something more durable. For a portfolio, that something is flexibility.
What fixing actually buys, and what it quietly takes away
Fixing does one thing well. It removes repayment uncertainty for the fixed term. If your holding strategy depends on knowing your exact outgoings while you carry an asset through a soft patch, that certainty has real value. There is no argument against it on that ground.
The cost sits in what fixing takes away, and this is where the popular advice goes thin.
Most fixed loans cap or ban extra repayments. Many restrict or exclude an offset account, or offer only a partial offset. You generally cannot restructure a fixed loan mid-term without triggering the exit process. And breaking a fixed loan early can be expensive in a way that is poorly understood, because the number is not a flat fee.
Break costs are an economic calculation, not a penalty. Under ASIC’s guidance, lenders use a net present value method tied to wholesale swap rates. In plain terms, the lender works out the difference between the wholesale rate when you fixed and the wholesale rate now, across your remaining fixed term and balance, and present-values it. If wholesale rates have fallen since you fixed, that gap can be large. ASIC’s own worked example shows a break cost running from zero to more than 15,000 dollars on a 500,000 dollar loan, depending on rate movement and time remaining. If wholesale rates have risen since you fixed, the formula can produce zero, because the lender can re-lend your repaid funds at a profit.
Read that last point again, because it is the trap. Break costs are largest exactly when rates have fallen, which is exactly the moment a portfolio builder most wants to refinance, release equity, or move lenders. The certainty you bought can become a toll gate on your next move.
The real decision for a portfolio: flexibility, not the rate bet
For an owner-occupier with one loan and no plans to move it, the fixed versus variable question is close to a pure rate and budgeting call. For someone running several loans across several properties, it is a different question entirely, because your loans are not just debts. They are the working capital of the portfolio.
Scaling a portfolio depends on being able to move your loans:
- Releasing equity from an appreciating property to fund the next deposit.
- Splitting or restructuring a loan as your strategy changes.
- Running surplus cash in an offset to cut interest without locking the money away.
- Refinancing to a fresh lender when your current one runs out of appetite.
That last one is not hypothetical in 2026. APRA has kept the serviceability buffer at 3 percentage points, so every lender assesses you at roughly three per cent above the actual rate, which trims borrowing capacity by around 15 to 20 per cent before you start. Layer on the debt-to-income limits lenders are applying, and it is common for a portfolio builder to hit a ceiling at one lender and need to take the next purchase to another. Moving to a fresh lender is often how the portfolio keeps growing once a bank says it has seen enough of your income.
Now put a large fixed loan in the middle of that. If it is mid-term when you need to release equity or move lenders, you are either blocked or paying a break cost to get out. You fixed for certainty and inherited an anchor.
What no one else is saying: For a portfolio, fixing is not a rate bet. It is a decision about which of your loans you are willing to freeze. The comparison sites model the interest you might save. They do not model the deal you cannot do because your equity is trapped behind a fixed term and a break cost. For a genuine portfolio builder in 2026, the option to move a loan is often worth more than the handful of basis points a fixed rate might save, precisely because APRA’s buffer and the debt-to-income limits already make each new purchase harder to fund.
This is why the sophisticated position is rarely “all fixed” or “all variable.” It is deciding, loan by loan, which parts of the structure need to stay mobile.
The split most advice underplays
The move that gets the least airtime is also the most useful for a portfolio: splitting a loan so part is fixed and part is variable.
The logic is simple once you stop thinking about rate direction. Fix the tranche you are certain you will not touch. This is the core debt against a property you intend to hold, where you value repayment certainty and have no plan to release equity or refinance in the fixed term. Keep the rest variable, with a full offset, so the working-capital portion of your portfolio stays mobile and your surplus cash keeps reducing interest.
A few practical points that matter more than the rate:
- Offset generally works properly only on the variable portion. If offset is central to how you manage surplus income between purchases, that argues for keeping a meaningful variable slice.
- Extra repayments usually flow freely on variable and are capped on fixed. If you are aggressively paying down non-deductible debt, that belongs on the variable or offset side.
- The split ratio should follow your plans for the next one to three years, not a rate forecast. If you expect to release equity within eighteen months, the amount you fix should be small.
Sizing the split well is a finance-structuring exercise, and it interacts with your borrowing capacity, your existing security positions, and whether any of your loans are cross-secured. If they are, untangling that is often the higher-value move before you even reach the fixed versus variable question. We covered why in the hidden cost of cross-collateralisation.
Where fixed can genuinely help an investor
None of this is an argument against fixing. There are clear cases where locking part of the structure is the right call for someone holding investment property.
Cashflow certainty through a holding period is the strongest one. If your plan is to hold an asset through a flat or falling market and your capacity to do that depends on knowing the repayment to the dollar, fixing the core of that loan removes a real risk. In a year where the RBA has said it may raise again, that certainty is not nothing.
Two cautions, both of which sit outside a broker’s lane and belong with the right professional.
Interest on money borrowed to produce assessable income is generally deductible whether the loan is fixed or variable, so the deductibility question rarely drives the fixed versus variable choice on its own. But how you structure and split loans can affect the cleanliness of your deductions and any pre-paid interest position, and that is a matter for a registered tax agent, not general information like this.
Likewise, whether you should be buying or holding a given asset at all in this environment is an investment decision. That belongs with a licensed financial adviser who can look at your whole position. Our lane is the credit structure once that decision is made.
How to make the call, in the credit lane
Strip out the rate forecasting and the decision becomes answerable. Work through it in this order:
1. Will you move this loan in the fixed term? If you expect to sell, refinance, or release equity from the security in the next one to three years, lean variable or keep the fixed portion small. The option to move is worth more than the certainty.
2. Do you rely on offset or extra repayments? If surplus cash sitting in offset is part of how you run the portfolio between purchases, keep enough variable to make that work.
3. Is the certainty worth the option cost for this specific loan? For the core debt on a long-term hold, often yes. For working-capital debt you may need to move, usually no.
4. Get a written break cost estimate before you fix, not after. You can request one from the lender at any time. Knowing the shape of the exit cost changes how much you are willing to lock.
5. Model everything at the assessed rate, not the headline rate. With APRA’s buffer live, the number that governs your next purchase is your rate plus three per cent, so decisions that protect your future borrowing capacity matter more than small rate savings today.
If you are not sure where your true capacity sits across lenders, that is the first thing to establish, because it determines how much flexibility you actually need to preserve. We walk through it in the borrowing capacity audit, and the interaction with lender debt-to-income limits is covered in what APRA’s 2026 DTI rules mean for investors.
Frequently asked questions
Will fixing protect me if the RBA raises again in 2026?
Fixing locks your rate for the fixed term, so a later cash rate rise would not change the repayment on the fixed portion during that period. The RBA held at 4.35 per cent in June 2026 and said it could raise again if needed, so repayment certainty has real value this year. The trade-off is the flexibility you give up, which matters more for a portfolio than for a single home loan.
Can I make extra repayments on a fixed home loan?
Usually only up to a capped amount, and many fixed loans do not allow an offset that works the way a variable one does. If aggressive extra repayments or a full offset are central to your plan, that argues for keeping more of the loan variable.
How much does it cost to break a fixed home loan?
There is no flat fee. Lenders calculate an economic cost using a net present value method tied to wholesale rates. ASIC’s worked example shows anywhere from zero to more than 15,000 dollars on a 500,000 dollar loan, depending on how rates have moved and how much of the fixed term remains. The cost is largest when wholesale rates have fallen since you fixed. You can ask your lender for a written estimate at any time.
Is fixed or variable better for an investment property?
It depends on whether you need to move that loan. Fixed suits the core debt on a long-term hold where you value certainty. Variable suits the working-capital debt you may need to refinance, release equity from, or offset. Many investors split the loan to get both. Interest is generally deductible either way, but confirm your position with a registered tax agent.
Can I have an offset account on a fixed loan?
Often not, or only a partial one. Full offset is typically a variable-loan feature. If offset is how you manage surplus cash between purchases, keep enough of the loan variable to preserve it.
Should I fix part of my loan instead of all of it?
For a portfolio, splitting is frequently the better answer. Fix the amount you are certain you will not touch during the fixed term, and keep the rest variable with offset so the mobile part of your portfolio stays mobile. The right ratio follows your plans for the next one to three years, not a rate forecast.
Does fixing affect my borrowing capacity?
Not directly through the rate, since lenders assess you at your rate plus APRA’s 3 percentage point buffer regardless. The indirect effect is larger: if a fixed term and its break cost stop you refinancing to a fresh lender when your current one is full, it can quietly cap how much you can go on to borrow across the portfolio.
The bottom line
In 2026, choosing between fixed and variable by guessing the RBA’s next move is a poor use of a decision that actually matters. The Bank is holding at 4.35 per cent with a bias to raise, fixed pricing has already lifted off its lows, and the direction from here is genuinely uncertain. That uncertainty is the point. When the rate call is a coin toss, the decision should rest on flexibility, and on which of your loans you can still move when the next opportunity or constraint appears.
For most portfolio builders that means a considered split rather than an all-or-nothing bet, structured around your plans for the next few years and your true capacity across lenders. Get that structure right and the rate becomes a detail. Get it wrong and a fixed term can freeze the very equity you were counting on to grow.
If you want a second set of eyes on how your loans are structured, and whether your current setup is preserving or quietly capping your ability to keep buying, book a complimentary 30-minute strategy call. If you would rather read first, our free guides for building and protecting wealth are a good place to start.
Build & Protect Financial Services. Credit Representative 539491 of Australian Finance Group Ltd (ACN 066 385 822), Australian Credit Licence 389087. This article is general information only and does not constitute personal financial or credit advice. Consider your own circumstances and seek advice from a licensed professional before acting.