Here's some basics.
Fixed
With a fixed rate loan, the interest rate is fixed for a specific period of time, generally between one and five years. A fixed rate loan is great if you require certainty of knowing what your monthly repayments will be. If interest rates rise, your interest rate will remain the same. The downside is that you won’t benefit from decreasing interest rates and a fixed rate loan generally lacks the flexibility and the features that come with a standard variable rate loan.
Fixed rates are starting to drop a little, however, some would argue that most fixed rates are still too high at present.
Variable
The interest rate varies throughout the term of the loan which is generally the result of movements in the Reserve Bank of Australia’s official cash rate. These loans usually offer flexibility and might include features such as an offset facility, redraw facility and no limits on additional repayments. The great thing about a variable loan is that if interest rates fall, your repayments will fall. However, if interest rates rise so will your repayments.
You could always have a combination of both.
Cheers,
Jamie