Should I apply for a fixed or variable rate

2 min read

FixedCertainty of cost

VariableCan rise or fall

BudgetingFavours fixed

Your callBefore applying

The core trade-off

A fixed-rate loan locks your repayment for the term, so you know exactly what you owe each month regardless of what interest rates do. A variable rate moves with a reference rate, which can save money if rates fall but costs more if they rise. Neither is inherently better — it is a choice about certainty versus potential saving.

Which suits your cash flow

If predictable budgeting matters — tight margins, a fixed plan, or simply a preference for no surprises — fixed usually wins. If you can absorb some movement and want to benefit from possible falls, variable may cost less over time. Model both scenarios on the repayment calculator and stress-test the variable case at a higher rate.

Deciding before you apply

Some applications ask which you prefer, and it can affect the products offered, so decide early. Factor it into your headroom — a variable rate needs a bigger cushion in case it rises. When comparing offers, keep rate type consistent, as covered in comparing offers fairly.

Frequently asked questions

Is a fixed or variable rate cheaper for a business loan?

It depends on what rates do over the term. Fixed gives certainty at a possible small premium; variable can be cheaper if rates fall but dearer if they rise. Choose on your appetite for that uncertainty, not a guess about rate moves.

Which is safer for a business on tight margins?

Usually fixed, because predictable repayments protect a tight budget from rate rises. If margins leave little room for a payment to increase, the certainty of a fixed rate is generally worth more than the chance of a variable saving.