In 2025 many Australian homeowners are asking whether fixing their mortgage rate makes sense. The Reserve Bank of Australia has shifted from rapid hikes to a cautious easing path as inflation cools. Banks now compete with sharper fixed and variable offers. You need to weigh certainty against flexibility and align the choice with your cash flow and risk tolerance.
Australia’s 2025 Interest Rate Landscape
RBA direction and inflation signals
The Reserve Bank of Australia under Governor Michele Bullock focuses on returning inflation to the 2 to 3 percent target while supporting a slowing economy. The bank signals that future moves will depend on data from prices, jobs, and spending. This backdrop reduces the risk of fresh sharp increases and encourages lenders to sharpen pricing.
At the same time APRA keeps a close watch on bank risk settings and serviceability buffers. The Australian Bureau of Statistics releases the inflation and wage figures that shape expectations. Together these institutions frame the path for mortgage pricing in 2025 and set the tone for the fixed versus variable decision.
What the Big Four expect
Major bank economists publish regular outlooks that shape borrower sentiment. Commonwealth Bank, Westpac, ANZ, and NAB each expect a gradual easing cycle rather than a fast plunge. Their guidance reflects the view that rates likely peaked in the last cycle and will step down as inflation cools.
- Commonwealth Bank of Australia and its team led by Gareth Aird expect a shallow path lower.
- Westpac and Bill Evans flag the possibility of deeper cuts into 2026.
- ANZ and NAB point to gradual relief while highlighting global risks.
Fixed vs Variable Rates in 2025
Pricing mechanics
Fixed rates reflect where markets expect the cash rate to sit over the term. Variable rates track the cash rate with a margin and move when lenders decide to pass on changes. This means fixed pricing can drop before official cuts arrive, while variable pricing often lags.
- Fixed rates move with bond market expectations.
- Variable rates move when banks reprice after Reserve Bank decisions.
- Fixed terms lock the price for a set period.
- Variable loans shift as the cycle evolves.
Features and flexibility
Variable loans usually provide an offset account, redraw, and unlimited extra repayments. Fixed loans often cap extra repayments and apply break costs if you exit early. However some lenders now pair fixed terms with better features to win customers.
- Offsets and unlimited extra repayments usually sit with variable loans.
- Fixed loans provide certainty but restrict changes during the term.
- Break costs can be large if you sell or refinance before the term ends.
Why Homeowners Are Considering Fixing
Behaviour and budgeting
Many households still feel the sting of the last hiking cycle. They want certainty. A fixed rate sets a stable repayment for 2 to 3 years and removes the fear of surprise increases. This stability supports clear budgets and calmer decision making.
Moreover banks have released fixed offers that start with a 4 for popular terms. These prices undercut many existing variable rates. Some borrowers want to grab that saving now rather than wait for possible cuts to flow through.
Who should not fix
You may avoid fixing if your situation needs maximum flexibility. You may also avoid fixing if you hold a strong cash buffer and you want full benefit from any future rate cuts.
- You plan to sell, renovate, or refinance soon and do not want break costs.
- You rely on a full offset account to manage cash flow and taxes.
- You expect variable pricing to fall faster than fixed pricing during your term.
Pros and Cons of Fixing in 2025
Advantages
Fixing gives you certainty. It can also deliver an immediate saving when a fixed offer sits below your current variable rate. This combination helps households plan with confidence and avoid the stress of repricing cycles.
Stable repayments across the term support clear budgets. You avoid delays or partial pass through when banks respond to Reserve Bank moves. You can secure a sharp rate before markets shift again.
Drawbacks
Fixing limits flexibility. You may miss the full benefit of future cuts and you may face costs if your plans change. You also accept caps on extra repayments with most fixed products.
Break costs can apply if you end the term early. Extra repayments may be capped and offsets may be limited. Variable pricing may fall below your fixed rate later in the term.
Expert Insights
Regulators and data watchers
The Reserve Bank of Australia sets the policy anchor and explains the outlook in public statements and minutes. Governor Michele Bullock stresses data dependence and steady progress on inflation. APRA maintains lending standards that affect how much households can borrow and how banks assess risk. The Australian Bureau of Statistics supplies the inflation and wage data that the market watches each month. Their combined signals guide lenders as they price both fixed and variable loans.
Banks and market commentators
Sally Tindall at Canstar tracks repricing across dozens of lenders and notes a clear lift in fixed rate competition in 2025. She encourages borrowers to model both paths rather than chase a perfect call. Mortgage brokers such as Josh Bartlett report more enquiries about split loans and short fixed terms as families seek balance. Bank economists add context. Gareth Aird at Commonwealth Bank highlights a measured path lower for the cash rate, while Bill Evans at Westpac outlines scenarios where cuts extend into 2026. ANZ and NAB reinforce the message that risks remain and that households should keep buffers.
Strategies for 2025
Split and refinance tactics
A split loan blends stability and flexibility. You fix a portion for certainty and you leave a portion variable to capture cuts. You can also refinance to sharpen pricing, improve features, and reset your structure.
- Review your budget and decide the share to fix versus variable.
- Compare fixed terms of 2 to 3 years from several lenders.
- Refinance if your current lender will not match a sharper offer.
- Keep an offset on the variable split to hold your cash buffer.
Checklist before you fix
Work through a clear checklist before you sign. Focus on break costs, extra repayment limits, and the features you need during the term. Confirm how your lender handles repricing and retention offers.
- Confirm your plans for the next 2 to 3 years.
- Check caps on extra repayments and redraw rules.
- Ask for the break cost method in writing.
- Ensure you can keep an offset on any variable split.
Empower Money’s Power Up Elite
Empower Money provides Power Up Elite for buyers who want to enter sooner. It advertises up to 105 percent loan to value ratio with zero deposit and no lenders mortgage insurance for eligible applicants. The structure uses an 80 percent first mortgage and a 25 percent second mortgage. The package includes an offset account and allows unlimited extra repayments. Pre approval can arrive in as little as 7 days subject to assessment.
- Up to 105 percent maximum LVR for eligible cases.
- Zero deposit and no lenders mortgage insurance.
- Offset account included with unlimited extra repayments.
- 30 year first mortgage and 10 year second mortgage structure.
- Minimum credit score 650 with 750 preferred and full doc requirements.
- Stable employment of at least 2 years and metro postcode property only.
- Loan amounts up to 2,000,000 subject to serviceability.
- Transparent fees that include an application fee, an annual fee, and a discharge fee.
This product targets first home buyers and growing families in metro areas. It also signals how far lenders will go to compete in 2025. Existing homeowners who consider refinancing can use these features as a benchmark when they compare offers. The servicing calculator and online process make it simple to test eligibility and start the journey.
