Variable Rate Home Loans
A variable rate home loan is the most common type of mortgage in Australia, and the one most borrowers default to unless they have a specific reason to fix. The rate moves with the market, which cuts both ways.
How a variable rate home loan works
Your interest rate can rise or fall at any point during the loan, at the lender’s discretion, usually in response to Reserve Bank of Australia (RBA) cash rate movements and the lender’s own funding costs. When the rate changes, your minimum repayment changes with it. See the RBA’s cash rate target.
Features you’ll typically get
Variable loans tend to come with more flexibility than fixed loans:
- Offset accounts, reducing the interest charged by offsetting your linked savings against the loan balance
- Redraw facilities, letting you pull back extra repayments if you need them
- Unlimited extra repayments, with no break costs for paying the loan down faster
- Easier refinancing, since there’s no fixed-term lock-in or exit penalty tied to the rate itself
Who a variable rate suits
- Borrowers who want to make extra repayments or use an offset account actively
- Borrowers comfortable with some repayment uncertainty in exchange for flexibility
- Anyone who thinks they may sell, refinance, or restructure their loan within the next few years
The trade-off
The obvious risk is that repayments can rise without warning if rates increase, which makes budgeting less predictable than a fixed rate. Borrowers on tight budgets sometimes prefer to fix some or all of their loan for this reason.
How to compare variable rate home loans
Don’t compare on the advertised rate alone. Two lenders offering the same headline rate can differ significantly on comparison rate, fees, offset account availability, and whether that rate applies to your actual LVR band. Use the table below to compare current variable rates side by side.
FAQ
Yes. Lenders can adjust variable rates independently of the RBA cash rate, though most movements do track cash rate changes over time. There’s no fixed schedule for when a lender can or can’t move its rate.
Not necessarily. At any given time, a fixed rate can sit above or below the equivalent variable rate, depending on what the market expects rates to do over the fixed term.
Yes, most lenders allow you to switch, though this may involve a small fee and is subject to the lender’s current fixed rate offers at the time you switch.