Variable Rate Home Loans

Variable rate home loans offer flexibility combined with ultra-low interest rates. Compare your options with Savvy.

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, updated on August 7th, 2023       

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If you're searching for a variable rate home loan, you're not alone. They're Australia's most popular type of mortgage and account for over 75% of all home loans. The beauty of variable rate loans is that they offer so much flexibility to tailor a mortgage to suit individual needs. 

Savvy can help you compare the best home loan interest rates so you can choose a variable loan that fits in neatly with your lifestyle.  Start the comparison process today to help you get your home loan application underway sooner.

Compare variable rate loans with Savvy to take full advantage of these benefits

Competitive interest rates

You can compare the very best loan deals around to help maximise your chances of finding a great low variable interest rate on your home loan

Take advantage of interest rate decreases

You can take advantage of drops in your lender’s interest rate to help you potentially save thousands on the total interest you pay on your mortgage.

Be spoilt for choice with so many loans on offer

The number of variable rate home loans in the market has ballooned in recent years, with a vast range of loans to choose from with many lenders competing for your business.

Choose your loan term and repayment frequency

There’s a variety of ways to reduce the interest you pay on your loan, including offset accounts and redraw options which also add greater flexibility to your loan.

Access additional features

Quick cash loans can be tailor-made to your requirements regarding how much you need and the time you need to pay it back

No early exit fees

The right loan for you today may not be the perfect one for you in five years’ time, but with no early exit fees on your variable rate loan, you have the choice to refinance with no nasty surprises.

Useful variable rate loan features explained

Top tips for securing the best variable rate home loan

Save as large a deposit as you can

This can save you money in several ways. The larger deposit you save up, the less you need to borrow, so you’ll save by having a smaller mortgage to start with.  Lenders can also offer cheaper interest rates to people with larger deposits, and if you can offer more than 20% of the value of your house as a deposit, you’ll also avoid paying Lenders Mortgage Insurance (LMI), which could save you thousands of dollars more.

Do your research with Savvy

Getting stuck with a home loan that doesn’t meet your needs can be an expensive mistake.  It’s important to do your research before deciding which loan and lender are right for you, but you can leave much of the comparison legwork to us.  Savvy will help you shortlist the best variable rate home loan deals currently available in Australia tailored to your needs.  Compare across all the factors which matter most to you.

Give yourself a flexible budget

Because repayments on variable rate loans will change over the coming months and years, it’s important to give yourself some wiggle room when you’re planning your home loan budget. Don’t leave yourself so tight on cash that you’ll be unable to make your loan repayments if interest rates suddenly go the wrong way and you find yourself with larger monthly repayments. A safe rule of thumb is to only spend 30% of your income on your variable rate mortgage repayments.

Pay off your loan as soon as you can

The longer you have a loan, the more it will cost you in interest.  Since your variable rate home loan may come with the option to make extra repayments, take advantage of this feature and opt for larger instalments over a shorter loan period (provided you can afford to).  If you do have extra cash at the end of your pay cycle, consider putting this on your loan as an additional repayment too, which can save you thousands over the life of your loan.

Keep an eye out for better deals

It’s important to remember that if the Reserve Bank reduces interest rates, all lenders decide if they will pass this reduction onto their customers. Some may only pass on a portion of the rate cut, while others will pass on 100% of the decrease. Since you have the flexibility to change lenders, it pays to keep an eye out for the best variable rate deals possible, so don’t be afraid to ask your lender to pass on rate cuts and be prepared to swap lenders if they don’t.

Your frequently asked variable rate home loan questions answered

How is interest calculated on a variable rate loan?

Interest is calculated on the principal sum you owe daily.  To find out how much interest you’ll pay each day based on your outstanding loan debt, use the following formula:

P (principal loan sum) x R (decimal interest rate) divided by 365 = Daily interest

For example, if you were working out the daily interest on a $400,000 loan with an interest rate of 2.65% p.a., your calculation would look like:

$400,000 x 0.0265 / 365 = $29.04 interest per day

Why does the Reserve Bank change interest rates?

Technically, the Australian Reserve Bank doesn’t change interest rates on home loans; only the lenders can do that. The Reserve Bank makes changes to the cash rate, which is the rate that banks use to loan to each other (sometimes referred to as the ‘underlying cash rate’). It makes changes as part of broader monetary policy to control Australia’s inflation rate and other economic indicators.

Which is better: fixed rate or variable rate loans?

Neither option is right for every borrower in every situation.  How you decide to pay off their loans is a very personal decision, so no one loan can be right or wrong.  That’s why it pays to do your research and use Savvy to help make sure you secure a loan that’s right for you.

Will the type of property I want to buy affect the interest rate I’m offered?

Yes – the type of property you want to buy will have an effect on the interest rate you’re offered.  Lenders will offer varying interest rates for different types of properties, such as units and apartments versus houses, and also for different types of borrowers, such as first homebuyers, refinancers, owner-builders, owner-occupiers and property investors.

Can I choose which features I get with my variable loan?

Yes – there are so many variable rate home loans on the market at the moment that you can compare offers to find the one that’s perfect for you: a loan that has all the features you need at the lowest possible interest rate.

What are some of the eligibility criteria for a variable rate loan?

In Australia, there are some basic eligibility criteria for all home loans.  These do not change depending on the type of loan you’re after.  To get a home loan you have to be:

  • at least 18 years old
  • either an Australian citizen or permanent resident, or married or de-facto with one
  • earn a steady income from stable, consistent employment
What can I do if interest rates go up and I can't afford the repayments on my variable loan?

Research company Roy Morgan found that over more than a decade, over half a million Australians are experiencing mortgage stress at any one time on average, so you’re not alone if you find yourself in this position.

It’s important to talk to your lender as soon as you realise you may not be able to make a loan repayment, as many lenders are very understanding and have hardship options available, including mortgage ‘holidays,’ freezes, reduced repayments for a period of time and loan term extensions to reduce monthly repayments.

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