Fixed vs Variable: What Lenders Assess
Loan type affects assessment, not just pricing
Fixed and variable loans are assessed differently by lenders, even when interest rates appear similar.
Assessment differences relate to repayment assumptions, buffers, and flexibility, not preference.
This page explains how lenders assess loan type, not which option is better.
How variable loans are assessed
Variable loans are typically assessed using:
- The actual rate plus a buffer, or
- A minimum assessment rate
They allow for repayment variation and redraw, which lenders factor into risk.
How fixed loans are assessed
Fixed loans may still be assessed using:
- A buffered rate above the fixed rate
- A reversion to a higher variable rate
Short fixed periods do not remove long-term risk from the assessment.
Why loan type affects borrowing capacity
Differences arise due to:
- Buffer application
- Loan term assumptions
- Repayment flexibility
In some cases, fixed loans can reduce borrowing capacity.
Fixed rates do not remove rate risk
From an assessment perspective:
- Fixed rates are temporary
- Repricing risk remains
- Buffers still apply
This explains why fixed loans do not bypass serviceability rules.
How loan type fits into the assessment framework
Loan type affects:
- Capacity
- Risk modelling
- Policy interpretation
It interacts with buffers and income recognition.
See: Serviceability Buffers
How to use this information
This explainer helps you understand:
- Why loan type can affect outcomes
- Why fixed rates don’t remove constraints
- Why assessments differ from expectations
It does not recommend a loan type.
Related assessment explainers
- Serviceability buffers
- Borrowing capacity: why it caps out
Important information
General information only. No personal advice is provided.