Fixed or variable? Choosing a loan rate while the RBA pauses

With the RBA holding the cash rate at 4.35% in August, the question we hear most has changed. Through the rises it was "should I wait?". Now it is "should I fix, or go variable?". Here is how the choice actually works for car and personal loans, without a crystal ball.

The short version

Most Australian car loans are fixed by default, and that is not an accident. A car is a fixed cost, the loan is amortising, and lenders price certainty cheaply on secured lending. Personal loans are where the fixed versus variable choice is real, because many lenders offer both and price them differently.

What fixed gets you

A fixed rate locks your repayment for the life of the loan. On a five year car loan that means roughly 260 identical weekly repayments, whatever the RBA does. The trade-offs are known upfront:

• If rates fall after you fix, you keep paying the higher rate.
• Early exit can cost money. Fixed loans often carry early repayment or break costs, so check them before you sign, especially if you tend to pay loans out early or upgrade cars often.

What variable gets you

A variable rate moves with the lender's funding costs, which loosely track the cash rate. During a hold, that mostly means stability. The real advantages are usually in the features rather than the rate itself:

• Extra repayments are typically free and unlimited.
• Redraw is often available if you get ahead.
• Paying the loan out early usually costs little or nothing.

The risk is symmetrical: if the RBA's upside inflation risks materialise and rates rise again, variable repayments rise with them.

A pause changes the psychology, not the maths

When rates were rising every quarter, fixing felt urgent. Now that the cash rate has been flat since May and most economists expect it to stay flat through 2026, the fear factor is gone. But the maths never cared about the psychology. The questions that actually decide it:

• How long will you hold the loan? Short horizons favour whichever rate is cheaper today, because there is less time for the future to matter.
• Will you pay extra? Regular overpayers often do better on a variable product with free extra repayments than on a slightly cheaper fixed rate that penalises them.
• Does an unexpected $50 a month hurt? If your budget has no give, certainty has real value and fixed earns its keep.

The number that matters more than either

Whichever structure you pick, the spread between lenders is bigger than the spread between fixed and variable at the same lender. Through the 2026 cycle, lenders repriced at different speeds, and the gap between the sharpest and most expensive quote for the same borrower widened. Comparing across a panel of lenders moves your repayment more than the fixed versus variable decision does.

Run your numbers both ways on the repayment calculator, and if you already have a loan from the expensive months of the cycle, check what a refinance would save at current pricing.

Where Loanseekers fits

Loanseekers compares fixed and variable options across 70+ lenders in one enquiry, without affecting your credit score. Our specialists can tell you which lenders currently suit your profile, and whether the certainty premium is worth paying in your case.