Variable rate home loans can offer potential savings over time.

Learn more about how a variable rate works, and whether it’s for you, before u loan.

What is a variable rate home loan?

A variable rate home loan, also known as a floating rate loan, is a type of mortgage where the interest rate can change over time. Unlike fixed rate loans, which lock in your interest rate for a specified period, variable rate loans are influenced by market conditions and can fluctuate up and down.

Is it better to get a variable rate or fixed rate home loan?

The choice between variable and fixed rate home loans depends on your financial goals, risk tolerance, and market conditions. Here's a brief comparison:

Variable rate home loan
  • Interest rates can move up or down in response to market changes.
  • Offers more flexibility, with potential for lower rates.
  • Ideal for borrowers who can adapt to changes in repayments.
  • May include features like offset accounts and additional repayment options.
Fixed rate home loan
  • Provides rate stability with a locked-in interest rate for a predetermined period.
  • Ideal for those who prefer predictable, unchanging repayments.
  • Protects against potential interest rate hikes.
  • May come with fewer extra features compared to variable rate loans.

Variable rate home loans are appealing in various situations:

  • Market expectations – When you believe interest rates are likely to decrease, a variable rate loan may offer lower interest costs over time.
  • Financial flexibility – If you're comfortable with potential fluctuations in your repayments and can adapt to market changes.
  • Additional features – Variable rate loans often come with features like offset accounts and redraw facilities, offering more financial options.
  • Shorter loan terms – If you plan to pay off your loan in a shorter time frame, the flexibility of a variable rate can be advantageous.

A split loan is a strategic approach that combines both fixed and variable rate components in your mortgage. This provides a balance between rate stability and flexibility. For instance, you can allocate a portion of your loan to a fixed rate and the rest to a variable rate, giving you the best of both worlds.

How to choose a variable or fixed rate loan?

Selecting the right home loan is a significant decision. Here's a step-by-step guide:

  • Set financial objectives – Clearly define your financial goals. Do you prefer rate stability or are you comfortable with rate fluctuations?
  • Compare lenders – Research and compare lenders offering both variable and fixed rate loans. Each may have different rates, terms, and fees.
  • Evaluate loan terms – Scrutinise the loan term to ensure it aligns with your objectives. Fixed rates are typically available for 1 to 5 years.
  • Consider extra features – Determine if you require features like offset accounts, redraw facilities, or the ability to make extra repayments.
  • Calculate costs – Assess the overall cost of the loan, including application and ongoing fees.
  • Consult a mortgage broker – Seeking expert advice is invaluable. A mortgage broker can analyse your financial situation, understand your goals, and guide you towards the ideal loan.

Who can help me decide what's best for me?

Choosing the best home loan for you is no small feat, there are a lot of features to take into account. Mortgage brokers are your trusted advisors in this journey. They will analyse your financial scenario, decipher your goals, and match you with the perfect loan. Their guidance can save you time, money, and numerous headaches, ensuring your home buying experience is a success.

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