Variable-Rate Home Loans

A variable-rate home loan gives you the freedom to make extra repayments, reduce interest, and pay off your loan sooner. If flexibility and long-term savings matter to you more than locking in a fixed rate, this option is worth considering.

Variable rate home loans

What Is A Variable-Rate Home Loan?

A variable-rate home loan is a type of mortgage in which the interest rate can change over time, based on factors such as the Reserve Bank of Australia’s (RBA) cash rate and the Bank Standard Variable Rate (BSVR).

This means your monthly repayments can fluctuate, offering the potential to save when rates fall, but also requiring you to budget carefully if they rise.

Many lenders offer variable-rate home loans without an application fee, making them a more attractive option for borrowers.

How Do Variable-Rate Home Loans Work?

As mentioned above, movements by the RBA will affect your variable rate.

Here’s how it typically works:

• Rate movements

  The RBA sets the official cash rate, which lenders use as a benchmark. When the RBA adjusts this rate, your lender may choose to increase or decrease your home loan rate in response.

• Your repayments adjust with the rate
  • If rates fall, your interest charges and repayments may decrease
  • If rates rise, your monthly repayments can increase
• The lender’s margin matters, too

  Besides the RBA cash rate, lenders also apply their own margin to determine your final rate. This is based on your loan size, credit profile, and loan-to-value ratio (LVR).

Example of how this works

Let’s say your loan has a variable interest rate of 6%, and you’re repaying $3597/month on a $600,000 loan

If the rate drops by 0.50 percentage points, your repayment could fall to around $3407. This will save you $190/month.

Use our home loan repayment calculator to estimate how rate changes could affect your repayments

Features Of A Variable-Rate Loan

Variable-rate loans typically include:

• Unlimited repayments
• Redraw facilities
• Offset account
• Loan splitting option

These features give you greater control over how and when you manage your loan, than with fixed-rate home loans.

Pros And Cons Of Variable-Rate Home Loans

Pros

• Availability: Variable-rate loans are widely offered by most lenders, making them a common choice for many borrowers.
• Features: These loans typically come with a range of benefits, including 100% offset accounts, unlimited extra repayments, and redraw facilities, providing flexibility in how you manage your mortgage.
• Refinancing Ease: Switching lenders is generally easier and comes with lower fees, giving you the option to refinance if better rates become available.
• Lower Rates: You could benefit from interest-rate reductions, which can lower your repayments during periods of rate cuts.
• Flexible Repayments: The ability to make extra repayments allows you to pay off your mortgage faster, potentially saving on interest over the life of the loan.

Cons

• Unpredictable Rates: Because interest rates can change, it can be challenging to budget, as your repayments may increase unexpectedly.
• Impact of Economic Changes: Your loan repayments could be influenced by broader economic factors, such as inflation or an economic downturn, which are beyond your control.
• Potential Financial Stress: If interest rates rise and your income does not keep pace, you may face financial stress trying to meet higher repayment obligations.

How To Apply For A Variable-Rate Home Loan

1. Connect with one of our mortgage experts to get started.

2. We’ll compare variable-rate loans from over 50-plus lenders.

3. We’ll provide expert guidance on the most suitable options for your needs.

4. Submit your application and track progress with your dedicated broker.

Why Choose Mortgage Brokers From Home Loan Experts?

• Strong Lender Relationships for Sharper Rates

  We have trusted relationships with a wide panel of lenders. This allows us to negotiate more competitive variable rates based on the strength of your application.

• Ongoing Support as Interest Rates Change

  There are no broker fees, so you get personalised guidance and support without paying a cent for our service.

• Expert Help at No Cost to You

  There are no broker fees for most loans, so you get personalised guidance and support without paying a cent. If a fee does apply, we’ll always tell you upfront.

• Industry-Leading Data Protection

  We are ISO 27001 certified for data security. Your personal and financial information is safeguarded with the highest standards.