What is a split loan? A mortgage divided into fixed and variable portions, giving you a balance of stability and flexibility.
Who do they suit? Often first-home buyers, investors, and refinancers who want predictable repayments but still want to benefit if variable rates fall.
What are the benefits and drawbacks? They offer rate protection and flexibility, but there are trade-offs like reduced offset access and managing two loan portions.
What do lenders look for? Factors include serviceability, the size of your fixed portion, break-cost risks, and any minimum split requirements.
How to structure a split? It’s usually flexible. For example, for steadier repayments, you might choose an 80% fixed / 20% variable split; for more flexibility, a 30% fixed / 70% variable split.
While many Aussies are facing higher variable repayments in 2025 and many are still in existing fixed-rate terms, borrowers are looking for greater flexibility. With rates holding steady as we head into a new year, many borrowers are considering other loan types; split rate home loans being a popular choice.
Split rate home loans offer added flexibility and customisation for borrowers seeking more control. How do they work? Essentially, they allow borrowers to lock in part of their loan (for peace of mind) while keeping part open to benefit from potential rate drops.
Split rate home loans can be a good fit for some borrowers, but it’s essential to review if they’re right for you. In this guide, we’ll help you get started on that. Then, we recommend speaking with your lender or broker to gain a more nuanced understanding.
Let’s start by taking a quick look at today’s market:
Cash rate: The Reserve Bank of Australia (RBA) is holding the cash rate steady at 3.6% as of 4 November 2025.
Average interest rates: Throughout 2025, rates have remained relatively consistent at approx. 6% for variable and 6.4% for fixed loans, still much higher than the low rates seen in early 2020.
Recent lender rates: As of November 2025, variable loan rates start at approx. 5.29%, with some as low as 4.99%, while fixed loan rates begin at approx. 5.29%, with some as low as 4.89%.
Housing costs: Housing costs, including new dwelling prices, continue to rise, contributing to inflation and putting upward pressure on mortgage interest rates.
Future rate cuts: One more rate cut is currently factored into forecasts for 2027, but this remains uncertain and will depend on incoming data. Rate cuts may be fewer than expected due to ongoing inflation risks.
What is a split rate home loan and how does it work?
Having had a quick look at today’s market, let’s dive into what split rate home loans are and how they work.
What is a split rate home loan?
A loan that’s split into two (or sometimes more) portions. One portion is charged interest at a variable rate, while the other portion is charged at a fixed rate.
Loans can be split evenly or in different ratios depending on your unique situation. For example, it could be 40% fixed and 60% variable.
This setup lets borrowers benefit from both the stability of a fixed rate and the flexibility of a variable rate.
How does a split home loan work?
To understand how a split rate home loan works, let’s look at this example:
Say you have an $800K home loan over 30 years and split it 50:50. You fix $400K at 2.8% for 2 years, and the other $400K is at a 2.5% variable rate.
Your total monthly repayments would be about $3,224, made up of:
Fixed: $1,644
Variable: $1,580
If after 10 months your lender raises the variable rate to 2.9%, your variable repayments increase to $1,665, and total monthly repayments become $3,309.
While no one likes rising repayments, having half fixed means the overall increase is less than if your entire loan was variable. Fixed repayments stay the same, keeping things predictable.
On the other hand, if interest rates had fallen in this scenario, you would have benefited from lower repayments on the variable portion.
Please note: This is a simplified scenario for illustration purposes only.
How is a split loan different? Comparing split vs. variable vs. fixed loans
To help you understand the difference between split vs. variable vs. fixed loans, the simplest way to think about it is this: split loans offer a mix of flexibility and certainty, while choosing a single loan type usually means opting for one or the other.
Split vs. Variable vs. Fixed loans: A quick snapshot
Feature | Split loan | Variable rate | Fixed rate |
|---|---|---|---|
Rate certainty | Partial | No | Yes |
Offset access | On variable part | Yes | Often no |
Extra repayments | On variable part | Yes | Limited |
Best for | Balance of both | Flexibility | Budget stability |
Why choose a split home loan in 2025?
As we noted earlier, with variable rates near 6%, fixed rates around 6.4%, and the cash rate steady with little chance of cuts soon, many Aussies are opting for split rate home loans in 2025.
Why? Because split loans balance stability – giving you predictable repayments – with flexibility to benefit if rates move. Also, lenders often customise them to suit your unique situation (for example, there’s no set split), which is an added benefit.
To better understand why a split loan might be a good choice, below we’ll explore who might benefit most and a quick guide to help you decide if it’s right for you.
Who might benefit most from a split loan?
First-home buyers: Often want flexibility while protecting part of their loan from rate rises, balancing predictable repayments with the chance to benefit if rates fall.
Investors: Use split loans to combine fixed-rate stability with variable-rate flexibility, taking advantage of tax-deductible interest and market responsiveness.
Refinancers: When refinancing, a split loan can ease the shift from fixed to variable by offering stability and flexibility, helping hedge against rate changes while keeping access to features like extra repayments or offsets.
Is a split loan right for you?
It might be suitable if you: | It might not be suitable if you: |
|---|---|
Want repayment stability and flexibility | Need full offset access on your entire loan balance |
Plan to make extra repayments | Expect to refinance or move before your fixed term ends |
Are unsure about future rate changes | Prefer not to manage two separate loan portions |
Are buying your first property and want both flexibility and stability | Want to keep things simple with a single loan |
Intend to use an offset account to reduce interest costs | Want to redraw your extra repayments anytime |
Want to ease into managing your loan gradually |
When split loans make sense (and when they don’t)
What are the benefits of splitting a home loan? | What are the drawbacks of splitting a home loan? |
|---|---|
Extra repayments: You can make unlimited extra repayments on the variable portion, helping you pay off your loan faster and potentially save on interest. | Repayments may vary month to month: Because part of your loan is variable, interest rate changes can affect your repayments, which may make budgeting a little harder. |
Sense of stability: If rates increase, the fixed portion of your loan won’t be affected, keeping your repayments consistent and predictable. | Interest rate increases: Repayments are likely to rise when interest rates increase, since part of your loan is charged at a variable rate. |
Access to loan features: Fixed loans often restrict offset and redraw facilities, but a variable portion keeps these options open. | Fees: You may incur additional fees on both parts of the loan, plus fees for features like offset accounts and redraw facilities. |
Benefit from rate drops: If interest rates fall, it’s possible to benefit from this, thanks to the variable. | Limited benefit from rate drops: If rates fall, you’ll be stuck paying the usual amount on your fixed portion. |
Flexible split: Whether you prefer a 50:50 or 80:20 split, most lenders offer flexibility to suit your needs. | Break fees: You may be charged break fees on the fixed portion if you refinance or repay your loan early. |
Decided on a split rate home loan? Here’s what lenders look for and your options
What lenders look for when approving a split
Before choosing a split loan, it helps to understand what lenders assess during approval.
Serviceability: Lenders check that you can comfortably afford repayments on both portions, stress-testing for fixed and variable rates.
Fixed portion and break costs: The fixed part is locked in for a set term, and break costs may apply if you repay or refinance early. Lenders want to be sure you understand and can manage this.
Split limits and minimums: Lenders may restrict how many splits you can have or require minimum amounts for each portion, which can affect approval.
Choosing a fixed-to-variable ratio: How to structure your loan
The next step when choosing a split loan is deciding how much to fix and how much to keep variable. There is no one-size-fits-all approach; in fact, split loans are often customisable.
You can usually choose your preferred ratio, and many lenders also offer flexible options like multiple splits, interest-only portions, and more.
A few examples of common splits:
80% fixed / 20% variable: May suit borrowers seeking stable repayments and protection from rate rises, with a small variable portion for some flexibility.
50% fixed / 50% variable: Could work well for those wanting a balance of steady repayments and the chance to benefit from rate drops and loan features.
30% fixed / 70% variable: Might appeal to borrowers aiming to make extra repayments and take advantage of falling rates, with greater flexibility.
So, you’ve got a split loan. Can you switch or refinance it?
Can you switch your split loan?
Often, yes. If your circumstances change or your split no longer suits you, you can usually switch to a fully variable or fixed-rate home loan. Just keep in mind that break costs may apply.
Can you refinance your split loan?
Yes, you can refinance a split loan, though the process varies between lenders. It’s similar to refinancing a fixed or variable loan but can involve extra steps because of the split structure, so expect a bit more paperwork and negotiation.
How break costs on the fixed portion may apply
As with most fixed-rate loans, break costs often apply if you repay or refinance early. With a split loan, the variable portion is usually unaffected, but the fixed portion can incur a break fee.
How refinancing can let you adjust the ratio
Refinancing can let you keep your split loan but change the fixed-to-variable ratio. For example, shifting from 50:50 to 30% fixed and 70% variable to gain more flexibility while maintaining balance.
How a broker helps navigate multiple splits or mixed structures
Refinancing a split loan with fixed and variable portions can be complex, with break costs and timing to consider. Brokers simplify this by assessing your loan, exploring tailored options, and helping you find the right balance.
For example, if you’re refinancing the fixed portion of your split loan, your broker can help you decide whether to renew the fixed term, convert some or all of it to variable, or adjust the split ratio to best fit your goals.
In today’s market, a split rate home loan might be the right move
With steady rates and no forecasted cuts expected for the remainder of the year, split rate home loans can be a suitable option, helping you balance the unknown with the known. Speak with your broker to see if it is the right move for you.
