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Variable Rate Loans

Move with the market to gain financial flexibility.

This loan structure does exactly what is says on the tin. It is a home loan with a fluctuating interest rate that rises and falls at any given time.

In general, the variable interest rate on your loan will change according to the market rate set by the RBA (Reserve Bank of Australia), but banks can set their own interest rates and change them at any time.

If you’ve taken out a variable rate loan, your monthly loan repayments will vary as interest rates go up and down.


  • You can pay off your home loan sooner and save money on interest by making extra repayments.
  • A redraw facility will enable you to withdraw any extra loan repayments if you need to access the funds. (Some lenders may have minimum amounts you can redraw).
  • Access to offset accounts will reduce the interest you pay. This account is linked to your home loan to ‘offset’ your loan balance every day before your lender calculates interest. Sound appealing? Find out more about offset accounts.
  • Flexible options allow you to make repayments at your convenience, be it weekly, fortnightly or monthly. This can allow you to align your repayments with your pay cycle, helping you to stay on budget.
  • You can split your loan for some protection against possible interest rate rises. This will involve setting up a fixed interest rate on a portion of your loan, and having a variable interest rate on the rest. Discover the benefits of split loans.
  • Switching loans and lenders is easy.
  • You’ll have to make larger repayments when interest rates increase, which could impact your budget and other financial goals. Go ahead and use our trusty online calculators to help you budget for potential rate increases.
  • If you’re on a tight budget, the constant fluctuation of your minimum repayment amount and the uncertainty it brings can be a pain when planning your finances.
  • Your interest rate is under the heel of your lender’s corporate decisions, the RBA’s cash rate, and the general market.
  • Lower interest rate loans may be available if the features of the variable rate loan are not needed or utilised.

A basic variable rate loan doesn’t include the bells and whistles of a home loan package, so it tends to have a lower interest rate and less fees. This home loan type is best suited to first home buyers aiming to keep costs down and manage a simple, convenient loan without the frills.

If you value more flexibility and want to redraw from your loan or hold extra funds in an offset account, you should consider a standard variable rate loan. These additional products are generally included in a home loan package.

What are the BENEFITS of a Basic variable rate loan?

  • Generally lower interest rate than Standard Variable Rate loans.
  • Repayments may be lower, due to lower interest rate, than on a Home Loan Package.
  • Redraw generally available (check if still available if interest only option taken).
  • Usually unlimited higher repayments or special repayments allowed.
  • Loan increases (Top Ups) generally allowed.

What are the DISADVANTAGES of a Basic variable rate loan?

  • The Interest Rate is still a variable rate which is subject to market fluctuations.
  • Lenders may increase/decrease rates independently of the Reserve Bank.
  • All of the features of Home Loan Package may not be available. Such as offset accounts.
  • You may not be able to split between part fixed and part basic variable.
  • Loan fees may be higher than a standard variable rate facility, depending on the Lender.

A introductory variable rate loan is a discounted rate during an initial period.

While there may be benefits to having an Introductory Rate Loan (e.g. low interest rate during initial period) there are also other factors that need to be considered.

What are the BENEFITS of n introductory variable rate loan?

  • Lower interest rate during the ‘honeymoon’ period.
  • Redraw generally available (check with Lender if the interest only option taken).
  • Unlimited higher repayments or special repayments allowed.
  • Loan increases (Top Ups) allowed.

What are the DISADVANTAGES of  introductory variable rate loan?

  • The Interest Rate (apart from some guaranteed period rates) is still a variable rate which is subject to market fluctuations.
  • Lenders may increase/decrease rates independently of the Reserve Bank.
  • Once the ‘honeymoon’ period expires, the interest rate will generally revert to the current standard variable rate which will increase loan repayments (if repayments had been set at the ‘honeymoon’ rate).
  • Not all of the features of standard variable rate loans may be available.
  • Generally, the loan fees are higher than a standard variable rate facility particularly if the loan is varied or discharged during the ‘honeymoon’ period.

More and more Aussies are choosing to take on their home loan as a package deal. This convenient bundle essentially combines your home loan with other frequently-used financial products.

For an annual charge, you can reap the benefits of money-saving features such as offset account and transaction fee waivers, a credit card with no annual fee and discounted insurance. But the real game changer of package banking is the slashed home loan interest rate it usually offers.

Before you rush to apply for a home loan package, you should consider the following:

  • To be eligible, your home loan needs to exceed a certain amount. This minimum limit is usually $250,000.
  • You will be charged an annual package fee ranging from $150 to $500, depending on your package and lender.
  • You may not need nor want a credit card, the limit of which could affect your borrowing capacity.
  • If you use this credit card, you might incur more debt at higher interest rates.

As always, our credit and mortgage advisors are available to discuss whether you should choose a basic or standard variable rate loan. Simply get in contact and we’ll set you down the best financial path for your situation.