Split Rate Home Loans

A split rate home loan lets you divide your mortgage into two portions: one fixed and one variable. This hybrid approach gives you the certainty of locked-in repayments on part of your loan while retaining the flexibility of a variable rate on the rest. For many Australian borrowers, splitting is a practical way to hedge against interest rate movements without going all-in on either product.

At Lagos Financial, we help clients across Sydney, Melbourne, Brisbane, Hobart, and Launceston structure split loans that align with their financial goals. Explore our full guide to home loans, or compare variable rate home loans and fixed rate home loans separately.

How a Split Rate Home Loan Works

When you split your home loan, your lender creates two sub-accounts from a single property security. Each portion is governed by its own interest rate type:

Fixed portion: The interest rate is locked for a set term — typically 1 to 5 years. Your repayments on this portion do not change during the fixed term, regardless of RBA cash rate movements.
Variable portion: The rate moves in line with lender pricing and the RBA cash rate. This portion usually allows unlimited extra repayments, redraw, and an offset account.

For example, on a $700,000 loan you might fix $420,000 (60%) at 5.89% p.a. and keep $280,000 (40%) variable. Your fixed repayments remain constant; your variable repayments change when rates move.

Common Split Ratios

60/40 Split

The most popular arrangement in Australia. Fixing 60% of the loan provides strong repayment certainty while keeping 40% variable for flexibility. Suitable for borrowers who want rate protection but still expect to make extra repayments or hold an offset account.

50/50 Split

A balanced approach giving equal weight to certainty and flexibility. Works well when you’re genuinely uncertain about rate direction or your future income. Each half is roughly equal in sensitivity to rate changes.

70/30 or 80/20 Split

Borrowers who prioritise payment certainty — for example, those on tight budgets or single incomes — sometimes fix a larger proportion. Be aware: a larger fixed portion means fewer extra repayments are possible without break costs.

The Offset Account on the Variable Portion

One of the biggest practical advantages of a split loan is attaching an offset account to the variable portion. Every dollar sitting in your offset account reduces the interest calculated on your variable balance. Because offset accounts are not permitted on fixed-rate loans (under most Australian lender policies), having even a 40% variable split means your savings can still work to reduce your interest bill.

For instance, a $280,000 variable balance with $30,000 in offset effectively charges interest on only $250,000 of that portion.

Pros and Cons of a Split Rate Loan

Advantages

Rate certainty on the fixed portion protects your budget if rates rise
Variable portion allows extra repayments without break costs
Offset account available on the variable split
Reduces the risk of being entirely wrong about rate direction

Disadvantages

If rates fall significantly, you’re still paying the higher fixed rate on the fixed portion
Fixed portion break costs can be substantial if you need to refinance or sell mid-term
Two sub-accounts can add administrative complexity
Not all lenders offer split facilities on every product

When Does Splitting Make Sense?

A split loan is particularly suitable when:

You want repayment certainty but can’t commit to a fully fixed loan
You’re buying an owner-occupied home and plan to make extra repayments over time
You’re mid-career with strong but somewhat variable income (e.g., commissions, bonuses)
Economic forecasts are genuinely uncertain and you don’t want to bet entirely on one direction
You have a meaningful amount in savings you want to hold in offset

Splitting is usually less compelling for property investors, who typically prefer fully variable loans for maximum flexibility and tax deductibility of interest, or for those who plan to sell within 2 years (where fixed break costs could negate benefits).

How to Decide Your Split Ratio

There is no universally correct ratio. Consider these factors:

Savings buffer: If you hold $50,000+ in savings, maximising the variable (offset-eligible) portion generates more interest savings.
Income stability: A single-income household with tight cash flow may benefit from a higher fixed proportion.
Remaining loan term and plans: If you expect to sell or refinance within 2–3 years, avoid fixing a large portion to minimise potential break costs.
Rate environment: When fixed rates are significantly lower than variable, fixing a larger proportion can provide genuine savings — but always compare comparison rates.

Frequently Asked Questions

Can I have more than two splits on my home loan?

Some lenders permit three or more splits, though this is uncommon. The practical benefits of additional splits are marginal, and the administrative complexity increases. Most borrowers achieve their goals with a simple two-way split.

What happens at the end of my fixed term?

When your fixed period expires, the fixed portion typically reverts to the lender’s standard variable rate — which is often higher than the best available variable rates. This is called a revert rate. You should review your loan structure 90 days before the fixed term ends to negotiate a new rate or refinance the fixed portion.

Are break costs charged on split loans?

Break costs apply only to the fixed portion if you exit the fixed term early. The variable portion can be repaid, refinanced, or closed at any time without penalty. Break costs under Australian law are calculated based on the lender’s wholesale funding loss and can range from a few hundred dollars to tens of thousands depending on the rate differential and remaining fixed term.

Can I increase my extra repayments on the fixed portion?

Most fixed-rate products cap additional repayments at $10,000–$30,000 per year on the fixed portion without triggering break costs. Extra repayments on the variable portion are unlimited with most lenders. Check your product disclosure statement for the specific cap that applies.

Get Expert Advice from Lagos Financial

With close to 20 years of experience and access to 60+ lenders, Victor Lagos and the Lagos Financial team can help you find the right loan for your situation. Book a free assessment or call us to discuss your options.

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About the Author
Victor Lagos is a licensed mortgage broker (ACL 546774) and founder of Lagos Financial, with close to 20 years of finance industry experience since beginning his career at Bluestone Mortgages in 2006. A member of the Finance Brokers Association of Australia (FBAA) since 2015 and the Australian Financial Complaints Authority (AFCA — 98399), Victor helps Australians build wealth through tailored home loan and property investment strategies, working with 60+ lenders nationwide. Last reviewed: March 2026.

Split Rate Home Loans | Fixed + Variable Combined