Why Australia fixes so few home loans, and how the US and Korea differ

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Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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ABC News published a comparison on Friday 9 October 2026 of how Australians borrow to buy a home and how borrowers do it in the United States, Japan and South Korea. Its starting point is a Reserve Bank of Australia figure: fewer than 5% of Australian mortgages are on a fixed rate, so almost every borrower feels a change in the cash rate.

The timing explains the interest. The Reserve Bank lifted the cash rate from 4.35% to 4.6% on Tuesday 29 September, a level the ABC describes as the highest in 15 years. In a country where nearly all home loans float, a rise of that kind reaches most mortgaged households. The ABC asks why that is so, what other countries do instead, and what it would take for an Australian lender to offer the 30-year fixed loan that is standard in the United States.

The broadcaster's report is an explainer, built on interviews with two academics and on published figures. This article reports what it found and adds what the Reserve Bank's own papers say about the Australian side of the comparison.

Reserve Bank of Australia Bulletin articles of May 2026 and April 2024 for the two Australian shares; ABC News, 9 October 2026, for the United States.

What the ABC compared

The ABC looks at three things in each country: whether the interest rate usually moves or stays put, how long a fixed rate can last, and what stands behind the lenders. It also says, in passing, that fixed terms running from 10 to 50 years are common in the United States, South Korea and the European Union.

The table gathers the points the report makes for each market. The row for Japan is shorter than the others for a reason given below it.

On Japan, the ABC quotes Doowon Lee of the University of Sydney. He told the broadcaster that Japanese interest rates stayed close to zero for decades, and that during that period some lenders offered Japanese nationals and permanent residents a loan for the full price, with no deposit. The Bank of Japan has since begun to raise rates, which Dr Lee described as a different story for borrowers. The report also refers to a 35-year horizon for Japanese loans, but the wording on whether most of them are fixed or variable could not be settled from the published text, so this article leaves that point out.

Why the United States can fix for 30 years

The American loan is the one the ABC's readers are most likely to envy when rates rise. A borrower there can agree a rate on the first day and keep it for 30 years.

The ABC's explanation is that the lender does not have to carry that risk alone. Two government-sponsored entities, Fannie Mae and Freddie Mac, guarantee about 70% of American mortgages, according to the report. Behind them sits a secondary market in which home loans are packaged into mortgage-backed securities and sold on. The buyers are investors such as pension funds and insurers, which want a long, steady stream of payments. The bank that wrote the loan passes the interest rate risk to them. The ABC also cites the United States Consumer Financial Protection Bureau, which says 30-year fixed loans reduce risk for lenders and make loans more affordable.

Richard Holden, an economist at the University of New South Wales, told the ABC that this transfer of risk is what lets American lenders offer such a long fixed term. He set the two systems side by side in one sentence: "There are pros and cons but we don't have anything like that in Australia."

The drawback he names is the other side of certainty. A borrower locked in for decades gains nothing when rates fall. Professor Holden pointed to the years from 2015 to 2021, and gave the ABC the example of a borrower fixed at 6% while new customers pay 2%.

How Australian loans came to be almost all variable

The ABC takes its Australian figure from the Reserve Bank. The central bank's own papers show how unusual the present position is, even by Australian standards.

An article in the Reserve Bank's Bulletin published on 28 May 2026, on banks' funding costs and lending rates, says the share of outstanding housing loans on a fixed rate fell to a historical low of less than 5% in 2025. It gives two reasons. Large volumes of loans fixed during the pandemic have reached the end of their terms and rolled onto variable rates, and since late 2023 only a small share of the major banks' new mortgage lending has been fixed.

The earlier part of that story is in a Bulletin article of 18 April 2024 on how the cash rate passes through to mortgage rates. The fixed share of housing credit stood at about 20% in early 2020, it says, climbed to a peak of almost 40% in early 2022 and had dropped to about 17% by December 2023. The Reserve Bank ties the climb to its own emergency measures. The Term Funding Facility and the target for the three-year bond yield gave lenders cheap funding for set terms, which let them price fixed loans below variable ones. When those measures ended, so did the advantage.

The May 2026 article also explains why the variable loan is the natural product for an Australian bank. Deposits provide around two-thirds of the major banks' funding, debt almost one-third and equity less than one-tenth. The debt issued at home is mostly bank bills and floating-rate bonds, which pay a short-term benchmark rate plus a margin, and offshore borrowing is generally swapped back to short-term Australian rates. Because the banks' assets are mostly variable-rate loans, the Reserve Bank writes, they arrange most of their liabilities to pay variable rates as well. A fixed home loan is priced differently: new fixed rates follow swap rates of the matching term.

What South Korea does differently

South Korea is closer to Australia than to the United States on one measure. Most Korean mortgages are variable, Dr Lee told the ABC, though the gap between fixed and variable rates is smaller there. Where a Korean borrower fixes, a term of five to seven years is the most common, and the report says terms can run as long as 35 years.

The difference is direction. The ABC reports that the Korean government has spent the past decade trying to raise the number of fixed-rate borrowers, and Dr Lee gave the aim as at least one third of mortgages fixed by the end of 2026.

Two other features change who borrows. The first is jeonse, a rental arrangement in which the tenant hands the owner a deposit worth 50% to 70% of the property's value, often for a two-year lease, and gets it back at the end. The ABC cites the Asia Society for the estimate that jeonse accounts for about 70% of rental agreements in Seoul. The report links jeonse to lower demand for loans from investors. Dr Lee told the ABC that banks compete for customers as a result, which narrows the gap between fixed and variable rates.

The second is tax. Dr Lee told the ABC that the gain on a home sold within a year is taxed at close to 70%, and at close to 60% if it is sold within two years. The ABC reports that the tax discourages quick resales and makes a five-year loan more workable.

What a rate rise costs when loans are variable

The practical meaning of the 5% figure is visible in estimates the ABC published on 28 September, the day before the Reserve Bank's decision. Canstar calculated for the broadcaster what a rise of 0.25 percentage points would add to the monthly repayment on three loan sizes, if lenders passed it on in full.

An American borrower who fixed years ago would see none of that. An Australian one sees nearly all of it, and the Reserve Bank's 2024 article measured the effect across countries. By December 2023 the average rate paid on outstanding Australian mortgages had risen by more than in the United States, New Zealand and Canada, even though Australia's policy rate had risen by less. Norway was the exception on its chart. The central bank put the result down to Australia's relatively high share of variable-rate loans.

The Reserve Bank does not treat that only as a weakness. Its May 2026 article notes that a lower fixed share makes household cash flows more sensitive to rate changes, which strengthens the way monetary policy works through that channel. It also records that households hold more protection than they did: over five years the share of housing loan facilities with an offset account rose from around 40% to 55%, and the share with a redraw facility from around 70% to 80%. In the media release for its Financial Stability Review on 1 October, the central bank said most households with a mortgage remain well placed to manage more difficult conditions, even if housing prices were to fall sharply, although it noted pockets of stress.

Fixing a rate in Australia today

A borrower who wants certainty in Australia can have it for a short period. The ABC's report includes a home owner who moved to a fixed rate in March, before the latest rise, and found that two years was the longest term on offer. He told the broadcaster he would have preferred a 25-year fixed loan.

Even that short certainty has become dearer. The ABC reported on 28 September that Macquarie had raised its fixed rates for the second time in three weeks, by up to 0.2 percentage points, and that Canstar counted 18 lenders lifting at least one fixed rate during September. Sally Tindall, data insights director at Canstar, told the ABC that banks were preparing for a growing chance that rates rise and stay higher for longer. That fits the Reserve Bank's account of pricing: fixed rates fell through most of 2025 and began to rise around the end of that year, following swap rates.

The Reserve Bank's May article adds one sign of renewed interest. Since 2025 the fixed share of new lending has been higher than the fixed share of loans outstanding, which is what a slow return to fixing would look like from a very low base.

What a 30-year fixed loan would need

Australian lenders are free to offer a 30-year fixed home loan today. Professor Holden made that point to the ABC, saying nothing stops them doing it now. They do not, in his account, because the supports that make it workable elsewhere are missing.

He listed what would have to change. The whole lending market would need to be reshaped, not one product added to it. The government would need to provide what he called scaffolding. One part of that would be issuing more 30-year government debt, which in his view would signal that a 30-year mortgage is a less risky thing to hold.

The ABC's report describes no proposal from the government or the regulators to do any of this, and it does not claim that one system is better. Each of the four markets places the risk of a rate change on someone: the investor who buys the loan in the United States, the tenant's deposit and the tax system in South Korea, and the borrower in Australia.

A fixed rate does not remove the risk that interest rates move. It decides who carries that risk, and for how long.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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