The cash rate has sat at 4.35 per cent since the RBA held in June, after the May hike. Typical owner-occupier variable rates are running 6.2 to 6.5 per cent, and because the APRA serviceability buffer is still 3 per cent, lenders are testing new borrowers at roughly 9.2 to 9.5 per cent. The buffer consultation that might change that closes on 18 July 2026, so nobody knows yet whether the test gets easier. Sitting across the desk from clients all month, I have watched the same paralysis play out: they cannot decide whether to fix or float, so they do nothing, and 'nothing' usually means an expensive standard variable rate ticking over while they wait for a signal that is not coming. There is a structure that ends the argument. A split loan divides your borrowing into two slices: one fixed, one variable. You fix the portion you need to be certain about and keep the rest variable with a full offset and unlimited extra repayments, so you stop betting the whole loan on a single rate call you are in no position to win.
How a split actually works
You take one loan, and at settlement you tell the lender how to carve it. Say $360,000 fixed for two years and $240,000 variable: that is a 60/40 split on a $600,000 loan. The fixed slice has a locked rate and a locked repayment for the term. The variable slice moves with the market and carries the features the fixed slice cannot: a 100 per cent offset account, full redraw, and the right to throw extra money at the principal whenever you have it. Two slices, one property, one loan account number with two sub-accounts. CBA, Westpac, NAB, ANZ, Macquarie and ING all offer it, and most do not charge extra to split.
A worked example on $600,000
Take a $600,000 owner-occupier loan over 30 years, split 60/40. The $360,000 fixed at, say, 6.19 per cent for two years gives a fixed repayment of about $2,205 a month that will not move no matter what the RBA does between now and mid-2028. The $240,000 variable at 6.39 per cent costs about $1,500 a month today. If the RBA hikes another 0.25 per cent and your lender passes it through in full, only the variable slice reacts: that is roughly an extra $38 a month, not the $96 you would cop if the whole $600,000 were variable. You have capped most of the downside of further moves. Now run it the other way. If you have $40,000 in savings and you park it in the offset against the variable slice, you stop paying interest on $40,000 of that $240,000 at 6.39 per cent, saving roughly $2,556 a year while keeping the cash available to withdraw the day you need it. You cannot do that against the fixed slice.
Be honest about the trade-offs
This is not a free lunch, and any broker who pitches it as one is selling. There are three real costs you need to walk in knowing.
- Break costs on the fixed slice. If you sell or refinance the property before the two years are up and wholesale rates have fallen, the lender charges a break fee that can run into the thousands or tens of thousands. It is not a penalty they invented to punish you; it is the lender recovering the funding loss. But it is real money and it is your money.
- The fixed slice usually cannot have an offset. Offset only works against the variable portion, which is why you size the variable slice to hold the savings and extra repayments you actually expect to make.
- You are guaranteed to be half wrong on rate direction. If rates rise, you will wish you fixed more. If they fall, you will wish you fixed less. That is the design, not a flaw. A split is insurance against being completely wrong, and like all insurance you pay for it by giving up the best-case outcome.
Who it actually suits
A split is for the borrower who wants a predictable repayment they can budget around but also wants liquidity, an offset, and the ability to overpay. It suits the household whose cashflow would buckle if the whole loan jumped another 0.50 per cent, but who also cannot stomach locking everything away with no offset and a five-figure break fee hanging over a possible move. If you have a thick buffer and you genuinely make extra repayments every month, stay fully variable. If you have no savings and no realistic prospect of moving for five years, a longer fix on more of the loan may beat a split. The split is the middle answer for the large group of people who are neither.
What you should actually do
Decide your split by how much of your monthly repayment you need to be predictable, not by trying to forecast the RBA. Work out the repayment number your household must hit even in a bad month, fix enough of the loan to lock that number in, and keep the rest variable so your savings can sit in offset and your extra repayments can compound. Then, before you sign anything, get the fixed-portion break-cost methodology in writing: ask the lender for the indicative break fee on a 0.50 per cent rate-fall scenario over the fixed term, so you know your worst case in dollars rather than discovering it the day you want to sell. Do not wait for the buffer consultation outcome on 18 July to make this call; the split works regardless of what APRA decides, because it never depended on you guessing right.
Disclosure: Your Finance Guide partners with Australian Lending and Investment Centre (ALG) ACL 505575 for broker matching, and ALG receives lender commissions on settled loans. We are paid when a loan settles, which is exactly why we tell you to get the break-cost methodology in writing first: your structure should suit your cashflow, not our settlement.