Podcast episode

Fixed vs Variable Rates: What Property Investors Get Wrong

12 May 2026With Arjun Paliwal & Jack Fouracre

About this episode

Interest rates are one of the most discussed topics in property investing, especially when markets become uncertain.

When rates rise, many investors immediately start asking whether they should fix their loan. When rates fall, others regret having fixed in the first place.

But the reality is that the fixed versus variable debate is often focused on the wrong question.

In this episode of the Property Nerds Podcast, Arjun Paliwal sat down with Jack Fouracre from Fouracre Financial to unpack how fixed and variable rates actually work, the hidden trade-offs investors often overlook, and why finance strategy is usually far more important than chasing the lowest possible interest rate.

What Happened

The discussion began with a simple question: why are fixed rates suddenly becoming popular again?

As interest rates have increased over recent years, many investors have started looking for certainty in their repayments. Fixed-rate loans offer that certainty by locking in a rate for a set period, typically between one and five years.

However, Jack explained that fixing a rate often comes with hidden costs and reduced flexibility. The conversation then expanded into how banks price fixed-rate products, why rate lock fees exist, the limitations around refinancing, and the broader role finance strategy plays in building long-term wealth.

Perhaps the most important takeaway from the episode was that successful investors rarely build wealth by focusing solely on interest rates. Instead, they focus on flexibility, portfolio growth, access to equity, and maintaining the ability to make strategic decisions when opportunities arise.

Key Findings

1. Fixed rates provide certainty, but they reduce flexibility

A fixed-rate loan locks your interest rate for a predetermined period, protecting you from future rate increases.

That certainty can be valuable for some borrowers, particularly those who want predictable repayments.

However, fixed loans often come with trade-offs. Investors may face restrictions on refinancing, switching lenders, accessing equity, or restructuring their loans during the fixed period.

While the repayment may be predictable, the broader lending strategy can become far less flexible.

2. The worst time to fix is often during a rate-rising cycle

One of the strongest points made during the episode was that many investors consider fixing their loans precisely when banks have already priced future rate increases into their fixed-rate offerings.

When interest rates are rising, lenders generally anticipate further increases and adjust fixed-rate products accordingly.

As a result, investors who fix late in the cycle may end up locking in rates that already reflect the market's expectations.

The discussion highlighted that fixed-rate decisions should be driven by personal circumstances and risk management, not simply by reacting to headlines.

3. Breaking a fixed loan can be expensive

Many borrowers underestimate the costs associated with exiting a fixed-rate loan early.

If market rates fall after a loan has been fixed, borrowers may wish to refinance or switch lenders. In many cases, this can trigger break costs that run into thousands of dollars.

These fees are designed to compensate lenders for the interest income they expected to receive over the fixed period.

Before fixing a loan, investors should understand not only the advertised rate but also the potential costs of changing strategy later.

4. Rate lock fees are another hidden consideration

Many investors assume that once they are approved for a fixed-rate loan, that rate is guaranteed.

In reality, fixed rates can change before settlement unless the borrower pays a rate lock fee.

This fee allows borrowers to secure the offered fixed rate during the settlement process, protecting them from changes in the lender's pricing.

While rate lock fees may seem small, they can reduce some of the perceived benefits of fixing in the first place.

5. Access to equity often matters more than a lower rate

One of the most valuable parts of the discussion focused on equity and portfolio flexibility.

Arjun shared how access to equity during uncertain periods provided significantly more financial security than a marginal reduction in interest rates ever could.

For many investors, the ability to access equity, strengthen cash buffers, fund future purchases, or manage unexpected events can have a much greater impact on long-term wealth creation than saving a small percentage on their interest rate.

The conversation reinforced the idea that finance should support strategy, not limit it.

6. Fixed rates and offset accounts often don't work well together

Offset accounts remain one of the most valuable tools available to property investors.

However, many fixed-rate loans either do not offer offset accounts or provide only partial offset functionality.

This creates an important trade-off. While investors may gain certainty through a fixed rate, they may lose some of the flexibility and interest savings that an offset account can provide.

Understanding how loan products fit into an overall strategy is often more important than comparing rates alone.

7. Property investing is ultimately a finance game

Throughout the episode, both Arjun and Jack repeatedly returned to a broader theme.

Successful investors do not build portfolios through rate chasing.

They build portfolios through strong finance structures, lender selection, borrowing capacity management, access to equity, and strategic flexibility.

A lower interest rate may improve cash flow in the short term, but finance strategy determines what opportunities remain available in the future.

Action Steps

Before deciding whether to fix or keep your loan variable, consider the bigger picture.

Understand why you're considering a fixed rate in the first place.
Assess whether flexibility may be more valuable than repayment certainty.
Review the costs of breaking a fixed loan before committing.
Consider how future equity releases could support your investment goals.
Check whether your preferred loan product allows for offset functionality.
Focus on your broader finance strategy rather than small differences in interest rates.
Model the real financial impact of any rate savings after fees, tax outcomes, and portfolio implications.

The best loan structure is rarely the one with the lowest advertised rate. It is usually the one that gives you the greatest ability to execute your long-term investment strategy.

If you'd like help building a finance strategy that aligns with your property goals, book a discovery call with InvestorKit.

Video chapters

Transcript

Read the full transcript

This transcript was generated automatically and may contain small errors.

During a cycle of rate increases is the worst time to fix your rates because everybody, including the banks, anticipate rates to go up. If stamping out inflation was the goal and it was solely the goal, they'd just put up rates to 7%. Why are they doing all this 0. 25 nonsense? They're doing it because it's not solely the goal.

People forget about that. Nerd alert! Property nerds. The home for data-driven property investors. Where we uncover Australia's hot and cold markets, latest headlines and trends.

Welcome back to another episode of the Property Nerds podcast. And today I'm in the studio with Jack Fouracre, co-host from Fouracre Financial. Jack, I know I've asked you this in previous episodes, but I want to see if the answers changed. Is the dream to still get on four acres? 100%.

I'm always looking. I'm always looking for... It can't be any one or two square metres over, mate. It's got to be on the dot. Mate, you know one day...

I mean, I don't wish this upon anyone. And I don't ask this to happen. But if one of our neighbours decides to sell or like, you know, like let's say wish upon anyone. It's not like they're dying or anything. I mean, I don't mean that.

I meant it more from like a... I don't want them to be forced to have to move out of the area if they don't want to. But if one of our neighbours sell, like that's the acres right there, man. We're there. And like, you know how much our kids get along and everything like that.

It'd be pretty cool, right? I would love to, man. That's the property nerds nerding out. I was telling you to get... Like talking about how you would get chickens.

The first thing I do is get a chicken. Like heaps of chickens. But you don't want to bring the foxes, mate. I don't care. I'll deal with it.

So see, okay, look. Lion King, circle of life, right? So here we go. The chickens bring the eggs. The eggs bring the mice.

The mice bring the snakes. And the chickens also bring the foxes. And then now where do the snakes go? They get the mice. Who gets the foxes?

You get the foxes. I'll get a bow and arrow. I'll have a couple of knives. I'll be good. We get fox noises.

Actually, you know what's crazy? We've got the cows next door. And so the foxes will go through and they'll live with some of the cows sometimes. But the cows will annoy them and the foxes will go away. It's a wild circle of life.

But where did it start then? Where did it start? The start of the chicken. So key is just go to Ojana. I eat a lot of eggs, man.

My kids eat eggs every morning. That's why they're like absolute sprinters. But look, I think we're going to take a very big turn from four-acre farmland. But look, for those who know Jack and I personally or maybe followed along the journey or want to know Jack and I personally, like me, Jack, Chris, our partner, commercial, and my brother, Ankit, our CTO at InvestorKit. So all four of us went out to Thailand.

And I'd say it's probably one of the best trips of my life in terms of the combination that we were able to get. It was like the four families together, the chill vibes, the training, eight kids there, all of us were two each, the training, the paddle, the food, the health, the Muay Thai, the scooter vibes. We won't talk about your scooter antics. Yeah, don't worry about the bike accident. But the main thing is like, mate, four acres, yeah, if we can all do that again, but like permanently on our street, that'd be nuts.

But okay, segue time. Property investing is an interesting space in the finance part because right now more people are talking about fixed rates versus variable rates. Mate, fixed rates are making a comeback. They're making a comeback. But before you do, tune into this episode.

Stay till the end because fixed rates and variable rates, there's a lot of different mistakes that people make. But first, Jack, what's the difference? What's the cost to break? Like simple terms, fixed rate, variable rate, what's the difference? Yeah, yeah.

So the difference is the rate that it gives you, right? And with a variable rate, it can fluctuate. The lender can change it. The RBA rate can change it. But a fixed rate, you can lock it in for one to five years.

But it's not like the variable rate that they're offering equals the exact fixed rates that they're offering for those one to five years. Obviously, if you're fixing it for one year, it might be awfully similar to what rate they're offering on the variable. If you fix it for the two years, it's probably going to be around the similar. But once you start going into three, four, and five, the fixed rate they offer you is actually higher than the variable rate that they're offering you. So it's kind of a bit of a gamble.

Or some would say it's like a safer bet because if you're on a variable rate and it fluctuates wildly, you're not in a position to afford it. But then on the fixed rate side, if you go for those longer fixed terms, you're immediately going to pay more in interest. And there's some issues around having it be a flexible loan, like not being able to go to a different bank, having to stay with that bank for any future equity releases and things like that. That's a big one, man. I mean, sometimes you also see the two years be a little bit better just to entice you to hang with that bank for a bit.

Because I can't remember which bank it was, but I remember seeing the stat, and it was wild. I was just like blown away. And the stat was that on average, this bank only has about four to four and a half year average lifespan of a home loan. And I was like, what? People keep going, I've had my loan since 19, da, da, da, right?

Or I've been with this bank. My parents were with CBA for their whole life. Right. I mean, I used to think that that was just everyone. But then like the loans move.

And so suddenly two years in the eyes of the banks is not a small win. It could be a big win. So if they can dangle the carrot just enough to make the two years attractive, but not make it super, super good and low and lose the margin. I find like this two year thing comes up a lot of people's minds because when I, or even the one year of late when interest rates, I think this happens every time interest rates rise up. Should we fix it for a year, Jack?

It's too late. I'm not a fan. It's too late. And I was, when I got into the game, it was around that COVID period where rates, we were fixing a lot of rates. And I had seen people that had fixed them at 5% and they were looking at the rates at 2% thinking, oh, like, can I refinance?

I'm like, it's going to cost you five, $6,000 just to break those fixed terms and then go on a cheaper rate because they want you to stay on that rate. And if you're going to exit early, well, they're going to look at the market rate, the market variable rate, do a calculation to recoup the lost interest that they're going to miss out on. We need to get an American banker or something. Like I haven't... 30-year fixed.

Yeah, I want them to join us just to talk about like why, how, what's happening. I haven't studied it deeply. Yeah. Because I mean, obviously I don't because of... It's not relevant for us.

It's not relevant. The banks don't offer it. So, you know, so I'm just like 30-year fixed rates. I have family members with 30-year fixed rates or long-term fixed rates at 2% something, 3% something. I'm like crazy.

I mean, when it comes to fixed rates though, so you got these different year options. Yeah. There's this term called rate lock. Yes. I have seen brokers use that from time to time.

What does it mean and how does it work? Yep. So if you're doing a refinance and you're wanting to fix your rate for two years, right? And they're offering like a 6. 1 for a two-year period.

Now, you'll get approved on that, but it doesn't necessarily lock you in for that fixed rate offering until that loan actually settles. So although you're getting approved, submitting and getting approved on a fixed rate, the fixed rate is variable until settlement. Once settlement happens and it's fixed, that's it, right? If they change their fixed rate offering before settlement, then you're stuck on the higher or lower, but generally it's higher, unless you pay what's called a rate lock fee. So the rate lock fee is different for every lender.

It depends on the loan amount. Sometimes it's a flat fee, but that typically cuts into the perceived benefit of going fixed. So yeah, we've had, you basically, if you don't pay the rate lock, you're running the risk of when the loan actually settles, it's completely different. They change their rate to a higher rate. So you guaranteed pretty much got to pay that fixed rate, the rate lock.

It's crazy. See, I wish they'd just change that and just basically said, when you're unconditionally approved, that's our commitment to you. And then either the file does not settle with the next timeframe or it settles. Imagine that. Because most settlements, I'm sure there'll be the bell-shaped curve and 90 A, they're going down.

If you just had a long-term trend line, the long-term trend line is like this. The second part is when they do go up, they don't stay up for long. Because it's usually to handle something or to move in line with something. So handle something is the inflationary part, but move in line with something is a strong economy, right? So you have kind of moments like now where the inflationary parts are the reasons and not as much the strong economy.

But we know that if you have a strong economy not there and inflation is there, one thing is going to catch up. Because if you're rising the rates to cater to one and you're trying to stamp out inflation, if stamping out inflation was the goal and it was solely the goal, they just put up rates to 7%. Why are they doing all this 0. 25 nonsense? They're doing it because it's not solely the goal.

People forget about that. What the goal is, is to increase it to reduce inflation whilst monitoring the employment conditions, the economic conditions, and ensuring that that is not hurt. Yeah, they don't want to crash it. Right. So from that perspective, if we know going up for long periods of time in an economy that doesn't go up for long periods of time in the way you'd want it to perfectly match with each other, it's not going to be something they can do hard and fast and forever.

It means where's it going to afterwards? And by the way, during a cycle of rate increases is the worst time to fix your rates because everybody, including the banks, anticipate rates to go up. Worst time to fix your rates because all the fixed rates are going to be higher. The margins are much higher. And secondly, you know what helps you more?

And you see this all the time. You know what helps you more when it comes to monetary shifts and changes? It's not the actual rate you get. It's the flexibility of what you can do with your property. Whenever I think of the times where uncertainties hit the hardest, the biggest solve to uncertainty wasn't the refinance I did because I got 0.

3 off, wasn't the rate that I fixed because I got that. It was the equity I was able to pull from the flexibility in my portfolio, from the different valuations and the different lenders to beef up my offset accounts. Because I knew two things have happened over the last 10 years of investing. Number one is that the equity of my portfolio grows faster than the money I can use. And number two is that the strength of your ability to hold the portfolio isn't always what you earn because in business, not every year is a good year.

But it's about what can I have in leftover cash to hold out. And I've realized that that's such a big game changer because when I pulled out, take it to 2021, I pulled out 600K in equity. Because of like second lockdown, things are going crazy again. We're just coming out the one like, what the hell is happening here? And so when I pulled out the 600K equity, fortunately, everything was going good in business.

But then part of me was just like, okay, do you know if it wasn't going good in business and say I didn't have a business that was doing that, do you know how helpful that would have been? No fixed rate could have saved my life, but that 600K equity would have. Because that's after tax money, Jack. It's 600 equity loan. And one thing I've learned as well, and I know I'm sidetracking here, but it's just so important to do with the rates world.

It's just to show where people's mindset should be. Flexibility and protection and enhancement of your portfolio happens through movement and finance strategy, not from rate pinching. I've never seen someone rate pinch to wealth creation. It doesn't happen. Definitely not.

It doesn't happen. It's just a big game changer when it comes to that. And I think this is where coming back to like investment savvy brokers, right? Property is a game of finance, not fixed rates. 100%.

It's a game of finance, not fixed rates. I'm waiting for the day a statue of like some real famous investors like put up somewhere and they're like, so how did you achieve that $100 million portfolio, like $200 million portfolio? It's all about interest rates. It's all about interest rates, man. I've never seen it.

No, thanks. No, thanks. No, thanks. But you know, when that 600K equity pool happens and it wasn't the cheapest of money at times as well, depending on which bank you go to, I kept a few hundred of it as buffer. I used hundreds of it for property investing and I was able to build even more wealth as a result of times of uncertainty because the times of uncertainty made me make a move that brought certainty and that certainty stares you at the eye and you look at it and you go, opportunity costs, what am I doing?

Why am I doing something? Then you feel good a little bit on the work side and the business side and you're like, you know what? What am I doing? I'm young here. We should do something.

So investors, if you focus on that rate and if you worry about what it's going to do, you will lose what you called out most, Jack, which is flexibility and the flexibility will like not give an investment savvy broker, if you don't have it, the thinking to help you. And then if you do break it, there comes the thousands of fees and then the same person who was cost conscious on the rate is also going to be cost conscious on the fees and they're not going to move around. And so when it comes to fixed rates though, Jack, I want to ask one more thing that's getting actually interesting because this is where it gets pretty unique. Someone who just settles, they obviously don't want to keep moving around once they've just settled and then the bank comes in and goes, we're giving real good one year terms. What's that all about?

Because I'm seeing that of late where it's like the bank settles your loan, you've settled with your broker and you get a really good one year term. Now it's not in the broker or the client's interest to move around every year. But then at the same time, the bank's given out these cheap one year fixed rates or cheaper. Is that the signs of maybe them saying something could be coming around the other way and there might be some cuts coming? Maybe.

Well, I don't think so actually because a lot of the word in the banks is that there's more increases to come. But like I said, that can change within a very short period of time. If it got really bad, the only lever they had to pull to have a soft landing or to simulate the economy is reducing rates. But I think where you'll see the sharpest fixed rate offerings is in the LMI space. When you're in LMI and you do a one to two year fixed rate, that's where they know that they're at risk of losing a customer short term because if you go in at 97% or you go in at 90% on investment property, the lenders know that you're going to leave soon based on a higher valuation elsewhere to go to 80%, right?

So the one and two year fixed rates on an LMI deal makes sense in a lot of cases. Now when it comes to the LMI deals, firstly, the one and two fixed rate, that might be that journey going down from 95 to 90 to 87, just makes sense. But let's talk about offsets because fixed rates and offsets, they don't get along either. Yeah. There's two lenders I can think of that have an offset account with a fixed rate.

That's it. And the ones that do but might not be in that name of two, they'll be partial offsets. I remember back in the days when I used to work at CBA, they had this partial offset. You just reminded me of a third lender. They do a partial offset.

They're partials, hey. There's two lenders that do 100% offset. One of them does it for a one year fixed rate. The other one just does it. They're just known for it.

But it doesn't necessarily mean that that's the right lender for you. And if you wanted to have something like that, you could just have a portion of your loan fixed and then the other portion variable to have the offset facility attached to it. It's interesting how people don't realize that you're missing out on that too. And offset balances are huge right now. The amount of people that have money in offset across this country in the billions.

And so from that perspective, the billions of dollars in offsets, do you really want your loan sitting and not being able to offset with the majority of lenders? And again, that's a power of flexibility being impacted negatively is if you're going to those couple of lenders only just because you want an offset with your fixed, you're product focusing, not strategy focusing. You're rate focusing, not strategy focusing. So it's a big one. Now, Jack, what you guys do at 4Acres, you start off with a first call and then it goes into a bit of information collection that goes into a more deeper strategy call.

And that strategy call is when you guys go through all the numbers. If people are looking to have that first 15 minute chat just to get that feel for where their strategy should be on finance, how can the team get in touch? Just head to 4acrefinancial. com. au.

You can book an appointment in through the website. Cool. Awesome, mate. Well, good chatting on all things fixed rates. And everyone, we like to do episodes like this because it's important to remember that in times like we are now, people gravitate to that first little shiny offer that a bank puts out there or the little ad that you saw fixed rates starting from.