What is a variable rate home loan?

A variable rate home loan is a type of home loan where the interest rate varies up and down. What this means is your home loan repayment can also fluctuate alongside the variable interest rate. Many factors that cause an interest rate to fluctuate is inflation, supply & demand, and economic growth. The Federal Reserve will influence the interest rate through monetary policy, which in turn will influences banks and financial institutions decision to modify their interest rates.

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Loan Interest Rates Comparison Rate*
Variable Special Offer
$500,000+; LVR 80% or below
(new borrowing only)
No establishment fee
100% Offset Account available		 5.99% p.a. 6.14% p.a.2
Variable (principle & interest)
$150,000+; LVR 90% or below
No Establishment fee
100% Offset Account available
 6.44% p.a. 6.74% p.a.1
Variable (interest only)
$150,000+; LVR 90% or below
No establishment fee
100% offset account available
 6.94% p.a 7.24% p.a.1

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Rates Interest Rates Comparison Rate
Variable (principal & interest)
$30,000+; LVR 90% or below
Offset account & free redraw3 		 7.44% p.a. 7.57% p.a.
Variable (interest only)
$30,000+; LVR 90% or below
Offset account & free redraw3		 7.94% p.a. 8.07% p.a.

Benefits of a variable home loan rate

Enjoy flexible interest repayments on variable home loans

You can enjoy the flexibility of a variable rate loan if you are wanting to make extra repayments on your home loan. This can help pay your mortgage down faster, which in return can save you interest in the long run.

Loan repayments can decrease on a variable rate home loan

When interest rates fall the home loan repayment will decrease and you can either keep paying the same amount towards the loan balance on your variable home loan or reduce your repayment which again allows you to have surplus cash for other things.

Extra features on a variable rate home loan

Sometimes a variable rate home loan can come with extra perks such as an offset account or a redraw facility. Very rarely you will find any fixed rate home loans with both of these features.

No break free costs on variable home loans

On a variable rate home loan, you won't have to worry about break costs however on a fixed rate home loan you would have to pay a fee to terminate the agreed term. And if rates get too high it's easier to negotiate a better deal when you aren't locked into an agreed fixed rate contract.

The best variable rate home loan

Comparing different variable home loans between banks can help, the main things to consider when comparing between variable rate home loans are:

  • Is the loan interest rate and comparison rate competitive?
  • Do I want to make extra repayments on the loan?
  • Does the variable rate loan offer redraw at no extra cost?
  • Does the mortgage have an offset account that offset the loan principle 100% with no extra costs?
  • What are the total costs of the loan?

You can use a loan comparison calculator to compare different variable loans, the difficulty using a calculator on a variable loan is not knowing what interest rates will do in the future.

 

Disadvantages of a variable rate home loan 

The downside is when your variable interest rate fluctuates so can your loan repayment so you could end up paying one amount this month and a different amount next month.

With a variable rate home loan, the rate rises can be unpredictable so there is a chance that the home loan interest rate could increase. This will increase the amount of interest you have to repay on the loan.  When your home loan rate changes, the bank will have to provide 20-30 days in advance to notify you that your interest rate and repayment will be changing.

Variable home loan rates vs fixed home loans

Are you trying to decide between fixed vs variable on your home loan this would depend on different circumstances. You could ask yourself these questions:

  1. How long do I plan on keeping the property before I decide to sell or upgrade?
  2. What type of fees are considered and how high is the comparison rate? the comparison rate will give a good indication of the total interest and fees associated with the loan.
  3. If interest rates were to increase, will I find it difficult to budget paying more than what I am comfortable with?
  4. Are my personal circumstances likely to change in the upcoming period? Am I likely to obtain a wage rise, or will my income potentially reduce?

Be sure to do some thorough research on variable and fixed rate home loans and get professional advice before signing a loan contract so you can make the right decision for your financial needs.

For all loan enquiries chat with a member of our lending team by arranging an appointment on 02 6763 5111.

Important Information

*WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

Credit eligibility criteria, terms and conditions, fees and charges apply.

Please refer to the Target Market Determination (TMD) in Disclosures and Home Loan Key Facts Sheet to see if this product suits you.

Loan to Value ratios are calculated based on type and location of eligible security property.

Northern Inland reserves the right to withdraw, extend or vary this offer.

1 This comparison rate is based on a $150,000 loan over a term of 25 years.
2 This comparison rate is based on a $300,000 loan over a term of 25 years.
3 Minimum $500 per draw