Want a home loan with more features, flexibility and a competitive rate? Get a variable rate mortgage.
Variable rate home loans are some of the most popular and competitive mortgage products on the market. They offer greater flexibility and generally come with more features than fixed rate loans, but their interest rates can change at any time. Compare a wide selection of variable rate products in the table below, or read on to find out if this type of loan is right for you.
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The HSBC Home Value Loan is a low rate with no monthly fees. Enjoy premium service with a dedicated HSBC Relationship Manager.
- Interest rate of 3.59% p.a.
- Comparison rate of 3.60% p.a.
- Application fee of $0
- Maximum LVR: 90%
- Minimum borrowing: $50,000
- Max borrowing: $7,500,000
Compare variable home loan rates
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Watch: Should I get a fixed or variable rate loan?
A variable rate home loan has an interest rate which can fluctuate as your lender responds to economic factors such as the cost of funding, the Reserve Bank of Australia's official cash rate decisions each month and more. This means over the course of a year, your home loan rate (and your periodic repayments) might increase or decrease. In Australian history, variable interest rates have seen highs of around 17%, and lows around 3%.
Variable rate home loans contrast with fixed rate home loans, where you enter into an agreement with your lender for a predetermined period of time, usually between one to five years, during which your interest rate won't change. There are also mixtures of variable rate and fixed rate home loans known as split rate loans, and these allow you to split your home loan into two or more portions and allocate variable or fixed rates to each portion.
In general, variable rate home loans have advantages and disadvantages you should be aware of.
- Features. Many variable rate home loans come with useful features, such as the ability to make additional repayments, offset accounts and redraw facilities. These features are not offered in abundance with fixed-rate loans.
- Easy to refinance. When you opt for a variable rate loan, you have the flexibility to refinance with another lender in order to secure a more competitive deal. With a fixed rate product, however, you would need to pay high discharge fees to exit the loan early.
- Falling interest rates. A variable rate home loan provides you with the ability to benefit from falling interest rates, which are typically passed on to variable rate customers. Even a 0.25% rate reduction could make a big difference to your periodic repayments.
- Interest rate rise. An interest rate rise on a variable rate home loan would make your repayments more expensive, and could make it more difficult to service your loan.
- Difficult to budget. If your rate is fluctuating regularly, it can be difficult to plan an accurate budget. You might have less money to allocate to other expenses if your home loan repayment rises.
Comparing a variable rate home loan should take into account a range of factors, including:
- Interest rate. Interest rates will impact your repayments, so ensure you choose an interest rate which will result in a repayment you can manage. It's also a good idea to use a repayment calculator to find out what your repayments will look like with the given interest rate, and also add an extra 1% on top of this to see what your repayments would be should interest rates rise. This will help you prepare and manage your interest rate risk.
- Fees. A variable rate home loan can come with a range of fees, including upfront application fees or ongoing fees, as well as fees to use features including offset accounts or redraw facilities. Ensure that the fees justify the interest rate and features you'll receive with the loan. This is why you should always pay attention to a loan's comparison rate, which takes into account its interest rate and fees and expresses them as a percentage.
- Features. What features you choose to add to your comparison will depend on how you want to use your home loan. If you prefer to have your salary paid into your home loan to minimise your interest charged, you might want to look for an offset account. If you want a home loan that allows you to make unlimited additional repayments, you might want to look for home loans with a free redraw facility.
- Eligibility. Different lenders will put limitations on what types of properties they will finance and the types of borrowers they will accept. Ensure the loans you're comparing are available for your situation, including the type and size of the property, your income source and your loan purpose.
There's no definitive answer to this. Many borrowers want the flexibility and competitive interest rate that comes with a variable loan. But others prefer knowing exactly what their repayments will be every month for a set period. Fixed rates are easier to budget for. Whatever your choice, you need to make some kind of prediction about the future of interest rates. If rates are low and likely to rise soon, fixing your rate could be a wise move. But if you think rates could go lower, or at least stay where they are, a variable rate might give you more options and lower repayments. You're also not stuck with your choice. You can always refinance your home loan if your rate jumps up.
There are a number of variable rate home loans on offer.
If you're looking for a more specialised type of variable home loan like some of the ones listed above, you should consider contacting a mortgage broker to get some free, expert guidance.
Choosing the right type of mortgage is complex. Here are few more specific questions and scenarios that might be relevant to you.