Compare the best variable rate home loans

How to compare variable rate home loans

Using Finder's comparison tables you can compare multiple features of variable rate home loans. Here's what to look out for:

1. Interest rates

The first thing to look at is the interest rate, as this will determine how much your repayments will be. The lower the rate, the better: noting that the rate will fluctuate throughout the life of your loan and could go higher. But remember that the interest rate should not necessarily determine your decision alone.

2. Comparison rates

You may be drawn in by a particularly low interest rate, but make sure you look at the comparison rate too. This rate takes into account any additional fees and charges attached to the loan, meaning it provides a more accurate reflection of the interest rate you'll pay. Note that the comp rate is always based on a loan value of $150,000, so it's not always the most accurate reflection of your situation, but it's a good guide.

3. Fees and charges

If the comparison rate is much higher, take a look at the fees and charges included. The key ones to watch out for are application fees, monthly or ongoing fees and settlement fees.

4. Loan features

Take a look at whether your variable rate home loan will come with features like an offset account or redraw facility.

Types of variable home loan products

Most lenders offer multiple variable rate home loans. But which type is best for you?

• Basic variable home loans. A basic variable loan has a lower rate than a lender's other products (usually) and doesn't have as many features. If you want a simple variable rate loan with no offset account, a basic loan is a good option.
• Introductory discount home loans. These loans (sometimes called honeymoon home loans) are often the lowest variable rate loans a lender offers. But after that initial discounted period, the rate will revert to a higher variable rate.
• Package home loans. These loans let you combine your mortgage with a transaction account (usually an offset account) plus a credit card or other financial products. In exchange, you can get waived or discounted fees on the products and the convenience of having all your bank products in one place. The downside? You pay an annual package fee of several hundred dollars.
• Standard variable home loans. Standard variable rates are a bit of a throwback. These are the benchmark variable rates used for home loans with the Big Four banks and some other lenders. Most lenders discount the actual rate you get or will recommend a similar loan with a lower rate.

What's the difference between fixed rate and variable rate home loans?

A variable interest rate home loan is a loan where the repayments can rise or fall each month, depending on whether the lender decides to change the interest rate. This is the opposite of a fixed rate home loan, which remains the same for a set period of time.

Variable rate mortgages

A variable rate loan can change at any time. Lenders increased their variable rate loans 8 times in 2022 and another 5 times (so far) in 2023! However, these loans almost always have lower interest rates than fixed rate loans.

There are no break fees for exiting a variable rate loan early and these loans are much more likely to come with offset accounts or let you make extra repayments.

Fixed rate mortgages

A fixed rate won't change (until the fixed period ends). This gives you certainty in knowing what your repayments will be. However, you will likely have a higher interest rate because of this.

Exiting a loan during the fixed period incurs a break cost. Depending on your loan size and how long you've fixed for, this can cost hundreds or even thousands of dollars.

The lowest variable rate vs the lowest fixed rate loan over time

This simple graph shows how the lowest variable rate loan compares to the lowest fixed rate loan.

Most of the time, variable rates are the market's lowest rates. But sometimes fixed rate loans can become lower than variable rates loans.

Fixed vs variable rates: What are the differences?

Still unsure? Consider the split loan option

Australian borrowers don't have to pick between variable and fixed. Many lenders allow you to split your loan into fixed and variable portions.

How do I know if variable rates are going to rise or fall?

Lenders are free to move your variable interest rate up or down whenever they want. In practice, lenders move rates in response to wider market and economic conditions.

While you can't really predict rate changes perfectly, it is possible to get a good sense of which direction rates are moving in.

The Reserve Bank

The Reserve Bank of Australia (RBA) sets the official cash rate each month. This is a benchmark for lenders to set interest rates on variable rate home loans.

The RBA lowers interest rates to stimulate economic growth and encourage spending. When inflation is high, the RBA raises rates to cool spending and drive prices down.

Rates have risen fast

The RBA began lifting the cash rate in May 2022 to combat inflation and rates have risen 13 times since then. This has meant that anyone on a variable interest rate has seen their mortgage rates rise too.

Economists are torn on whether or not we have seen the peak of rising rates.

How to find the best variable rate home loan for you

The best variable rate home loan depends on your requirements as a borrower. But in general you want a loan with a low rate, low fees and features you need.

1. Get a low interest rate (and low fees)

With any home loan, a lower interest rate makes for a better home loan. A lower rate means lower repayments and it makes your home loan cheaper.

Here's a quick example using the same loan amount but with a 0.40% difference in the rate:

You can use a repayment calculator to see the difference between various rates or check the repayment column in the loan table above.

2. Pick the right loan purpose and loan type

Even the lowest rate on earth is not very useful if you have the wrong loan type. If you're looking to finance an investment property then you will need an investment loan. If you're buying or refinancing a loan for the home you live in then you need an owner-occupier home loan.

3. Get a loan with the right features

Variable loans often come with useful features that give you more control over your mortgage.

• Offset. By putting your savings into an offset account you will reduce the amount of your loan you are paying interest against, saving you a lot of money.
• Extra repayments. Variable rate mortgages allow you to make extra repayments. This means you can get out of debt faster and pay less interest.
• Redraw. If you have made extra repayments but suddenly need to pull them out to cover an emergency, a loan with a redraw facility lets you do just that.
• Cashback. Many lenders are offering incentives like cashback, where you get money paid back to you. Usually between $1,000 and $4,000, you can use this money towards your home loan amount or for something like renovating your property.
• Home loans packages. If you need to roll more than one loan under the same umbrella – like if you have investment properties – you may be able to get this as a package.

Finder's top variable rate home loan picks December 2023

Every month we look at all the variable rate home loans offered by our commercial partners at Finder. We evaluate these loans based on their interest rates, fees and minimum deposit size.

Our top picks are divided into 3 categories based on different borrowers' needs: first home buyer, refinancer and investor.

Refinancers

Bendigo Bank Express Variable Home Loan

Principal & interest Owner-occupier
10% min. Deposit

5.97

% p.a.

interest rate

6.12

% p.a.

comp. rate

Investors

Unloan Variable Home Loan

Principal & interest Investment Refinance
20% min. Deposit

6.04

% p.a.

interest rate

5.95

% p.a.

comp. rate

First home buyers

loans.com.au Variable Home Loan

Principal & interest Owner-occupier
10% min. Deposit

6.04

% p.a.

interest rate

6.06

% p.a.

comp. rate

This article was fact-checked and reviewed by Nicole Pedersen-McKinnon, an accredited and award-winning finance broker and industry mentor. Content has been updated for 2023.

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• What is the best variable home loan rate in Australia?

  Interest rates have changed a lot over the last couple of years and they could change over the next few months as well. While good interest rates are important, remember to look at what other features and fees come with the loan.

• Is a variable rate home loan better than a fixed rate home loan?

  Whether you choose a variable rate home loan or a fixed rate home loan is really dependent on your circumstances. After rates kept rising in 2022 and 2023, a variable rate home loan became the better option for most people. Use our repayment calculator and speak to a mortgage broker if you want more information on what the right rate is for you.