Variable rates are a type of home loan rate that, if the market works with you, can help you to cut down on your mortgage costs. To assess whether a variable home loan rate is right for you, you’ll need to understand how and why rates can change. 

variable rate

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3.27%

Variable

3.28%

HSBC

$1.5k

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

4.00

/ 5
More details

3.09%

Variable

3.05%

Athena Home Loans

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.15

/ 5
More details

3.36%

Variable

3.39%

IMB Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 90%
Extra Repayments
Interest Only
Owner Occupied

3.87

/ 5
More details

3.49%

Variable

3.45%

Athena Home Loans

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.53

/ 5
More details

3.59%

Variable

3.49%

Athena Home Loans

$898

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.10

/ 5
More details

3.59%

Variable

3.24%

Athena Home Loans

$898

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.10

/ 5
More details

3.09%

Variable

3.09%

UBank

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.27

/ 5
More details

2.88%

Variable

2.90%

loans.com.au

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.35

/ 5
More details

3.49%

Variable

3.49%

UBank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.65

/ 5
More details

3.32%

Variable

3.37%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.88

/ 5
More details

3.37%

Variable

3.75%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.03

/ 5
More details

3.38%

Variable

3.52%

Virgin Money

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.00

/ 5
More details

3.39%

Variable

3.39%

Hume Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.95

/ 5
More details

3.67%

Variable

3.72%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.37

/ 5
More details

2.97%

Variable

2.99%

Well Home Loans

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

4.54

/ 5
More details

3.77%

Variable

4.15%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.41

/ 5
More details

3.69%

Variable

3.83%

Virgin Money

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.52

/ 5
More details

3.69%

Variable

3.88%

Pepper

$1.5k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.42

/ 5
More details

4.47%

Variable

4.66%

Pepper

$1.7k

Redraw facility
Offset Account
Borrow up to 65%
Extra Repayments
Interest Only
Owner Occupied

2.29

/ 5
More details

4.66%

Variable

4.85%

Pepper

$1.7k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

2.00

/ 5
More details

Learn more about home loans

How variable home loan rates fluctuate

The interest rate a lender charges on a variable rate home loan is based on the official cash rate set by the Reserve Bank of Australia (RBA). On the first Tuesday of every month (except January), the RBA meet to set the cash rate

If the cash rate is increased, variable interest rates will rise with them, and if the cash rate falls, variable rates should too. However, lender’s don’t always pass on full rate changes to their customers. This is because they need to balance the needs of shareholders, savers and borrowers. 

Lower interest rates could mean lower profits. They also impact savings account rates, meaning savers will suffer particularly if there are a series of cash rate cuts in a short period of time. Interest rate hikes can also negatively impact homeowners by growing household debt, as the amount owed would increase.            

Follow financial news, experts and commentators to stay on top of how the RBA may change rates. This way you can try to be prepared for any potential mortgage repayment changes.

TIP:

RateCity recommends that you factor in your ability to afford a rate increase of 2-3 per cent before you apply for a home loan. Use a mortgage calculator to see how an increase would impact your repayments and budget. To qualify for lower rates, consider saving a greater deposit amount or increasing your credit score. 

Benefits of a variable rate mortgage

There are three types of home loan rates available: variable, fixed or split. Variable rate home loans may help you to save money, as well as offer greater flexibility. As mentioned above, most lenders base their variable interest rates on the RBA’s official cash rate. If the cash rate falls, your lender may pass this rate cut on to you, potentially lowering your home loan repayments.

You can also take advantage of lower rates to pay down your home loan debt. This is done by continuing to make higher repayments, even if your loan decreases. Just ensure your loan allows for extra repayments first. Making higher repayments can help to reduce the total principal, and therefore the amount of interest paid over the life of your loan.

Variable rate mortgages also tend to be more flexible than their fixed rate counterparts. Fixed rate home loans are more likely to lock you into set repayment plans with restrictions on making additional repayments. Plus, with a variable rate home loan, you’re more likely to enjoy access to optional bonus features, such as offset accounts or redraw facilities.

Keep in mind that there are risks with variable home loans. If the RBA increases Australia’s official cash rate, your lender will likely pass this rate rise on to you. This will increase the cost of your repayments. Further, it’s possible that an extended period of regular interest rate rises could leave you in mortgage stress, struggling to repay a loan that was once easily affordable.

Also, it’s important to remember that many lenders charge fees as well as interest on their home loans, which can make a big difference to their overall cost to you. Ensure you look at the fees associated with any home loan.

What else should you know about variable rate home loans?

Fixed rate loans can revert into variable rate loans

Even if you’re thinking about taking out a fixed home loan, you’ll need to know about variable rates. Most fixed rate home loans revert back to a lenders standard variable rate at the end of the fixed term. This new rate may be much higher than the one you were on. Lenders often offer lower ‘honeymoon’ fixed rates to attract new customers. Make sure you know what to expect when your fixed rate period ends. 

Can’t decide? Split your loan

If you’d like to limit the impact of rate changes on your home loan, while still enjoying some flexibility, you can consider a split rate loan.

In this arrangement, your lender will charge a fixed rate of interest on a percentage of your home loan, and a variable rate of interest on the remaining balance. If rates rise, the fixed percentage will help to keep your repayments stable and affordable. And if rates fall, you’ll still enjoy some savings on repayments for the variable percentage.

Frequently asked questions

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

What is a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

What is a standard variable rate (SVR)?

The standard variable rate (SVR) is the interest rate a lender applies to their standard home loan. It is a variable interest rate which is normally used as a benchmark from which they price their other variable rate home loan products.

A standard variable rate home loan typically includes most, if not all the features the lender has on offer, such as an offset account, but it often comes with a higher interest rate attached than their most ‘basic’ product on offer (usually referred to as their basic variable rate mortgage).

What is the difference between a fixed rate and variable rate?

A variable rate can fluctuate over the life of a loan as determined by your lender. While the rate is broadly reflective of market conditions, including the Reserve Bank’s cash rate, it is by no means the sole determining factor in your bank’s decision-making process.

A fixed rate is one which is set for a period of time, regardless of market fluctuations. Fixed rates can be as short as one year or as long as 15 years however after this time it will revert to a variable rate, unless you negotiate with your bank to enter into another fixed term agreement

Variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts however fixed rates do offer customers a level of security by knowing exactly how much they need to set aside each month.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Does the Rate Guarantee apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Rate Guarantee.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

What is a honeymoon rate and honeymoon period?

Also known as the ‘introductory rate’ or ‘bait rate’, a honeymoon rate is a special low interest rate applied to loans for an initial period to attract more borrowers. The honeymoon period when this lower rate applies usually varies from six months to one year. The rate can be fixed, capped or variable for the first 12 months of the loan. At the end of the term, the loan reverts to the standard variable rate.

What is the Rate Guarantee?

The Rate Guarantee is RateCity putting its money where its mouth is. We believe that too many Australians are paying too much for their home loans. We’re so confident we can help Aussies save money, if we can’t beat your current rate, we’ll give you a $100 gift card.*

There are three reasons it pays to check your rate with the RateCity Rate Guarantee:

  • You can find out how much you could save on your home loan by switching to a loan with a lower interest rate
  • If we can’t beat your current rate, you can claim a $100 gift card with our Rate Guarantee*
  • Everyone who checks their home loan will be entered in the draw for a chance to win $1 million!^

What is a split home loan?

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

How do you determine which home loan rates/products I’m shown?

When you check your home loan rate, you’ll supply some basic information about your current loan, including:

  • the amount owing on your mortgage
  • the value of your property
  • your current interest rate
  • name of existing lender
  • property address

We’ll compare this information to the home loan options in the RateCity database, and show you which home loan products you may be eligible to apply for.

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

What is an investment loan?

An investment loan is a home loan that is taken out to purchase a property purely for investment purposes. This means that the purchaser will not be living in the property but will instead rent it out or simply retain it for purposes of capital growth.

What is a construction loan?

A construction loan is loan taken out for the purpose of building or substantially renovating a residential property. Under this type of loan, the funds are released in stages when certain milestones in the construction process are reached. Once the building is complete, the loan will revert to a standard principal and interest mortgage.

Mortgage Calculator, Loan Results

These are the loans that may be suitable, based on your pre-selected criteria. 

Is there a limit to how many people I can invite?

No. You can invite as many people to enter the competition as you like. Just remember that you’ll only get one extra entry in the competition for each invited friend that checks their own rate.

What is a redraw fee?

Redraw fees are charged by your lender when you want to take money you have already paid into your mortgage back out. Typically, banks will only allow you to take money out of your loan if you have a redraw facility attached to your loan, and the money you are taking out is part of any additional repayments you’ve made. The average redraw fee is around $19 however there are plenty of lenders who include a number of fee-free redraws a year. Tip: Negative-gearers beware – any money redrawn is often treated as new borrowing for tax purposes, so there may be limits on how you can use it if you want to maximise your tax deduction.

When will I know if I’ve been successful?

If your entry is selected as our winner, we’ll notify you in writing within two business days of the draw. Your name will also be published online on the RateCity from 22/05/2020.

Can I enter more than once?

You can only enter the draw for the chance to win $1 million once. However, you can get additional entries by inviting your friends to check their own home loan rates. 

When you complete your initial entry, you’ll receive a unique URL that you can send to your friends. For each friend that checks their home loan rates using this URL, you’ll receive one additional entry into the draw. 

What is a guarantor and guarantee?

A guarantor is a person, third party or organisation that agrees to guarantee your loan.

The guarantee is a legal assurance given by the guarantor to pay the loan if the borrower defaults and is unable to pay.