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Variable Rate Home Loans Comparison

Posted April 18th, 2010 and last modified May 24th, 2013

What is a Variable Rate Loan?

A variable rate home loan is a very popular product in the Australian lending market and as such, a very competitive product amongst lenders. If you are suited to the flexibility of a variable interest rate and can benefit from the features which come with a variable rate home loan, you can select from a wide range of home loans from after comparing the lenders vying for your business.

Loans.com.au - Dream Loan Express Home Loan

Variable Rate Home Loan Offer

Apply for Loans.com.au - Dream Loan Express Home Loan home loan and get a low variable interest rate, plus no application fee and no additional repayment fee. Plus a flexible 100% redraw offset facility.

  • Interest Rate of 4.87% p.a.
  • Comparison Rate of 4.89% p.a.
  • Application Fee of $0
  • Maximum LVR: 90%
  • Minimum Borrowing: $50,000
  • Maximum Borrowing: $2,000,000

Standard Variable Rate Loans

Interest Rate (p.a.) Comp Rate^ (p.a.) App Fee / Annual Service Fee Max LVR Monthly Payment
Loans.com.au - Dream Loan Express Home Loan
Loans.com.au - Dream Loan Express Home Loan
A home loan offer with a $0 application fee and one of the lowest available home loan interest rates in the market. This loan is for refinance only. 4.87%
4.89%
$0 / $0 90% Apply Now For The Loans.com.au - Dream Loan Express Home Loan
Read More About The Loans.com.au - Dream Loan Express Home Loan
State Custodians Peak Performance Offset Home Loan
State Custodians Peak Performance Offset Home Loan
A variable home loan offer with offset facility. No application fee. 4.74%
5.11%
$0 / $345 80% Apply Now For The State Custodians Peak Performance Offset Home Loan
Read More About The State Custodians Peak Performance Offset Home Loan
UBank UHomeLoan (Variable Rate) - Refinance Only
UBank UHomeLoan (Variable Rate) - Refinance Only
Refinance only option. Low interest rate from UBank backed by NAB. 4.87%
4.87%
$0 / $0 80% Apply Now For The UBank UHomeLoan (Variable Rate) - Refinance Only
Read More About The UBank UHomeLoan (Variable Rate) - Refinance Only
Loans.com.au - Blackboard Special
Loans.com.au - Blackboard Special
A limited time home loan offer. Offers a Visa Debit card and 100% offset facility. This loan is available for purchases only. 4.75%
4.77%
$0 / $0 80% Apply Now For The Loans.com.au - Blackboard Special
Read More About The Loans.com.au - Blackboard Special
State Custodians Standard Variable Offset Loan
State Custodians Standard Variable Offset Loan
Awarded Mortgage of the Year 2012 this multi-award winner features 100% offset and a loyalty 0.25% rate drop after 5 years. 4.84%
5.09%
$0 / $345 80% Apply Now For The State Custodians Standard Variable Offset Loan
Read More About The State Custodians Standard Variable Offset Loan
HSBC Home Value Loan
HSBC Home Value Loan
A variable rate home loan offer with no establishment fee. 4.99%
5.01%
$0 / $0 80% Apply Now For The HSBC Home Value Loan
Read More About The HSBC Home Value Loan
Bankwest Online Home Loan
Bankwest Online Home Loan
A low variable home loan rate with no ongoing fees. No application fee for a limited time. Exclusive online offer only. 5.13%
5.14%
$0 / $0 80% Apply Now For The Bankwest Online Home Loan
Read More About The Bankwest Online Home Loan
ANZ Simplicity Plus Basic Home Loan
ANZ Simplicity Plus Basic Home Loan
A low variable rate with a low ongoing fee. Borrow up to 95% LVR. 5.43%
5.48%
$600 / $0 80% Apply Now For The ANZ Simplicity Plus Basic Home Loan
Read More About The ANZ Simplicity Plus Basic Home Loan
eMoney Variable Rate Home Loan
eMoney Variable Rate Home Loan
A low rate variable rate home loan with no ongoing or application fees. 5.20%
5.25%
$0 / $0 90% Apply Now For The eMoney Variable Rate Home Loan
Read More About The eMoney Variable Rate Home Loan
RAMS Low Rate Home Loan
RAMS Low Rate Home Loan
Introductory home loan offer from RAMS. Choose your repayment frequency. 5.29%
5.70%
$595 / $240 95% Apply Now For The RAMS Low Rate Home Loan
Read More About The RAMS Low Rate Home Loan
Citibank Basic Variable Rate Home Loan
Citibank Basic Variable Rate Home Loan
A basic variable home loan offer from an internationally recognised bank. 5.50%
5.55%
$399 / $0 80% Apply Now For The Citibank Basic Variable Rate Home Loan
Read More About The Citibank Basic Variable Rate Home Loan
IMB Budget Home Loan <90% LVR
IMB Budget Home Loan <90% LVR
Consider a low rate variable offer from IMB. 5.28%
5.41%
$0 / $120 90% Apply Now For The IMB Budget Home Loan <90% LVR
Read More About The IMB Budget Home Loan <90% LVR
AMP Bank Essential Home Loan
AMP Bank Essential Home Loan
The AMP Essential Home Loan offers no ongoing fees and a very competitive variable rate. A great variable rate loan from on the most trusted companies in Australia. 5.40%
5.42%
$0 / $0 80% Apply Now For The AMP Bank Essential Home Loan
Read More About The AMP Bank Essential Home Loan
Homeloans Ultra Plus 75
Homeloans Ultra Plus 75
A great package with a discounted interest offer with up to 75% LVR. 5.24%
5.57%
$0 / $330 75% Apply Now For The Homeloans Ultra Plus 75
Read More About The Homeloans Ultra Plus 75
Newcastle Permanent Premium Plus Package Home Loan
Newcastle Permanent Premium Plus Package Home Loan
Enjoy a low variable rate home loan and take advantage on flexible repayment. 5.12%
5.45%
$0 / $350 80% Apply Now For The Newcastle Permanent Premium Plus Package Home Loan
Read More About The Newcastle Permanent Premium Plus Package Home Loan
Resi Home Loans - True Saver
Resi Home Loans - True Saver
Payoff your home loan with a low interest rate and a low ongoing fee. 5.17%
5.55%
$0 / $330 75% Apply Now For The Resi Home Loans - True Saver
Read More About The Resi Home Loans - True Saver
ANZ Breakfree Home Loan Package ($150,000 - $249,999)
ANZ Breakfree Home Loan Package ($150,000 - $249,999)
Take advantage of up to 0.70% off the Standard Variable Rate. 5.63%
$0 / $375 80% Apply Now For The ANZ Breakfree Home Loan Package ($150,000 - $249,999)
Read More About The ANZ Breakfree Home Loan Package ($150,000 - $249,999)
Community First Basic Variable Home Loan
Community First Basic Variable Home Loan
A basic variable loan offer with no annual fee or account keeping fees. 5.73%
5.82%
$500 / $0 85% Apply Now For The Community First Basic Variable Home Loan
Read More About The Community First Basic Variable Home Loan
Commonwealth Bank No Fee Variable Rate
Commonwealth Bank No Fee Variable Rate
Enjoy zero fees and choice in repayment frequencies and special repayments. 5.45%
5.45%
$0 / $0 80% Apply Now For The Commonwealth Bank No Fee Variable Rate
Read More About The Commonwealth Bank No Fee Variable Rate
Westpac Flexi First Option Home Loan
Westpac Flexi First Option Home Loan
Westpac Basic Low Variable Interest Rate Loan. 5.40%
5.40%
$600 / $0 95% Apply Now For The Westpac Flexi First Option Home Loan
Read More About The Westpac Flexi First Option Home Loan

Benefits of a Variable Rate Home Loan

Even though a variable rate home loan is one of the most popular loans available you still need to make your own comparisons of the features and benefits to make sure that they suit you. A variable rate home loans are notoriously feature packed, but you will only benefit from such inclusive features if you will use them regularly and to the full extent they are intended for otherwise you could be paying more fees for features you don't need. Consider whether the benefits of a variable rate home loan will help you manage your mortgage:

  • Your home loan interest rate is likely to fall when official rates drop. A variable home loan interest rate allows you to take advantage of falling interest rates when the Reserve Bank decides to drop their official rates. With a fixed-rate home loan rates remain unchanged regardless of movements by the RBA.
  • You are getting a very feature packed loan. Variable-rate home loan will often have inclusions such as a 100% offset account, free additional repayments and redraw facilities, and even a line of credit option so you can take advantage of equity you have built in your home.
  • Variable rates are often still lower than fixed rates. Currently the average variable rate is between 0.5% and 1% lower than most fixed rates. This means you can be getting a better deal on a variable interest rate and at the same time you can benefit from falling rates.
  • You can choose to cap your variable-rate. Several Australian lenders have introduced a variable rate home loan where you can choose to cap your rate so that it does not rise above a certain amount but you can still benefit if the rate decreases. You can choose capped variable home loans for a term which suits you and capping at a slightly higher rate can often be more beneficial than choosing a fixed-rate which is slightly lower initially.

How To Use A Variable Rate Home Loan

As with any home loan product you need to make sure you understand all of the features of a variable-rate home loan so you can make sure the loan, your savings and your repayments are all working hard for you. To maximise the benefits of a variable-rate home loan:

  • Make the most of all the extra features. When you paid a higher application fee or you paid to add a professional package with additional features to your variable home loan, you are paying for the features added into your loan somewhere. Therefore make sure that you are able to use all of those extra features to their full potential so that you enjoy the full benefits of having a feature packed variable-rate home loan.
  • Budget for variations in your interest rate. Just as you can take advantage of falling interest rates, you also need to be prepared for rising rates as well. Therefore when you are preparing a home loan budget, budget for an increase in your interest rate of at least 2%, as this is not only the stress rate which lender will use to determine your eligibility, it can give you a good idea of just how much your repayments can change from a seemingly small rate rise.
  • Don't be tempted to fix. If you shop around you can often find a variable interest rate home loan with a lower rate than those offered on fixed-rate terms. Plus by the time interest rates become unbearable and you are thinking about fixing your variable-rate, rates are probably about to drop anyway so fixing at the height of an interest-rate cycle is actually going to cost you money because you are locking in a higher fixed rate.

Introductory home loans are often also called honeymoon home loans because they are very popular with first home buyers who have saved hard for their deposit and other home loan costs, and need a little more room in their budget while they rebuild their savings. Anyone can benefit from an introductory variable rate though, even if you are a second home buyer, refinancing or investing.

An introductory variable interest rate will be applied to an introductory home loan for a set period of time. This introductory period could last for anywhere from six months to three years. At the end of the introductory period, your home loan interest rate reverts to the lender's standard variable interest rate for your loan type.

There are two ways a variable interest rate may be discounted in the first months or years of your loan:

  1. A set discount. An introductory loan can offer a discount of the standard variable interest rate for an introductory period. For example, if your lender's standard variable rate is 7% and your introductory discount is 0.5% then you will save 0.5% for the entire introductory period, so if your lender raises their rates to 7.25% you will pay 6.75% and if their rates go down to 6.50% you will pay just 6% interest.
  2. A set discounted rate. An introductory variable rate can also be in the form of an ongoing lower interest rate which is set at 6% for example, where the lender's standard variable rate is 7%. However, in this instance the discount can be diminished if the lender lowers their interest rates because where you were saving 1% if the lender drops their rates to 6.75% you are only saving a quarter of a percent. At the same time, your repayments are fixed for the introductory period, which can also be helpful when you are just starting out.

With any introductory variable interest rate it is important to remember to not only compare the discounted rates, but also the revert rates as this is the interest rate you will be paying for the majority of your home loan's life.

What are the benefits of introductory variable rates?

Securing a discounted interest rate is always a benefit, but you also want to make sure you will be able to make the most of the advantages of an introductory variable interest rate home loan, to ensure this is the right loan choice for you.

Therefore, consider whether you could benefit from:

  • An ongoing introductory low interest rate. With an introductory variable interest rate you will remain several steps ahead of official interest rates in the first few months or years of your loan. This can influence your choice of loan, because you may be worried about interest rate rises, but not ready to lock into a fixed rate loan, but with an introductory variable rate, you don't have to.
  • An introduction to loan repayments. If you are a first home buyer, mortgage repayments can come as a big shock to your budget. Even if you are buying a second home or refinancing, you may be borrowing more money, and therefore looking at higher repayments. However, an introductory variable rate will allow you to introduce a lower loan repayment into your budget, adjust to that, and then find that little bit more room for your regular repayments, rather than being shocked in full repayments from the beginning.
  • Some of the lowest interest rates available. Introductory variable rates are becoming a very competitive loan product and as a result are some of the lowest available on any loan type.
  • More funds for new home costs. When you buy a new home there are more costs than just repayments, loan fees and stamp duty to worry about. There are moving costs, the cost of new furniture and of course paying for the house warming party. With a lower introductory variable rate on your home loan, you can free up cash for these new home costs.
  • Can choose flexible repayment options. An introductory variable rate can be applied to various types of loans, so if you shop around you can find a loan with additional repayment and redraw facilities, and even an offset account to save you even more.

What are the pitfalls of an introductory variable rate?

As with any loan product, if you use an introductory variable rate loan outside of its intended parameters you can be penalised. Therefore, make sure you can avoid pitfalls such as:

  • Higher exit fees. Lenders are able to offer lower introductory rates because they know they will be getting their costs back from you in interest and fees over the life of the loan. Therefore, if you choose to exit your introductory variable rate loan during the introductory period, or even within the first few years after the introductory period has ended, you can be faced with high exit fees.
  • Some limited features. Make sure your introductory home loan has all of the features you want and need in a loan, as some may limit the number or value of additional repayments which can be made during the introductory period.
  • High standard variable rate. When comparing introductory variable rates, be sure to compare the lender's standard rates too because you could be faced with much higher repayments than expected when your introductory rate reverts to the standard rate.

How can you find ongoing lower interest rates on your home loan?

If you are not suited to an introductory variable rate loan because you need a low doc loan because you are self employed, or you are building your own home and need a construction loan, then you may be able to take advantage of other loan features which help you attract a lower interest rate.

Introductory variable rate home loans can also be found with some or all of these features, so you can continue to save on interest with:

  • An offset account. An offset account is a transaction account which is linked to your home loan account and the balance of the offset account reduces the amount of your loan which attracts interest. For example, if you have a $250,000 home loan and you have $10,000 in your offset account, you pay interest on just $240,000. This then means your monthly repayments are lower as they are made up of less interest, so if you continue to make the same monthly repayment, the extra amount will come directly from your principal loan amount, and you can repay your loan sooner, because you pay less interest.
  • A professional package discount. Many lenders will offer a discounted interest rate as part of a professional package if you borrow over a certain amount. The discount often increases the more you borrow and can be an ongoing interest rate discount for the life of the loan, up to 0.7%.
  • A basic home loan. A basic home loan is one without any additional features or products attached. As such, this simple loan product charges the lowest interest rate of any loan product, often up to 2% lower than a standard variable interest rate loan.

If you are able to find room in your budget for possible rate rises, and you have the diligence to maintain higher home loan repayments to get ahead when rates are low then you could benefit from a variable-rate home loan.

Basic Variable Rate Home Loans

What is a Basic Variable Loan

A basic home loan is a specific home loan that is offered by many providers. The basic home loans are:

  • Basic variable loan. The basic home loans are loans that will help you save money. The interest rate that is offered with the basic home loans will be a variable rate that will change over time.
  • Who is suited to a basic variable loan. Many people will be suited to the basic variable loan. However, the basic variable loan will mainly suit people who are looking for a cheap loan that does not require them to play around with other features to help them save money.

Features of the Basic Variable loan.

The basic variable loans come with a variety of features. The features offered with the basic variable loans are:

  • Low interest rate. The main feature of the basic variable rate home loans is the lowest rate. The interest rate that is offered with the basic variable rate loans will usually be the lowest that are offered of any product offered by a provider.
  • Low fees. The basic variable loans will generally have no ongoing fees that are charged to the loan account. This can save you a lot of money over the course of the loan.
  • Fewer features. One of the disadvantages of a basic variable loan is that the loan will often come with few features. While many people will not use any of the features that may be offered with loans people in the right situation may be able to save a lot of money by getting a loan with features.
  • What you should ask for. If you are getting a basic variable loan you should be sure that you get one that allows you to make additional repayments. By making additional repayments when you can you will be able to save a lot of money on interest.

Downsides of the Basic Variable Loans

While the basic variable loans have a lot of upside they do have some disadvantages. The downside of a basic variable home loan will be:

  • Interest rates are vulnerable. The interest rates that are offered with the basic variable loans are great. However, if the rates are risen by the reserve bank then the rates on the basic loans will generally always go up.
  • Fewer features means less flexibility. While the basic variable home loans are great they do lack features. The lack of features usually translates to less flexibility in the loan. If you are looking for a loan with a bit more flexibility then you are probably better looking elsewhere.

Basic variable loans are great home loans for people that would just like to repay their home loan as they see fit. People who get a basic variable rate home loan are people that just want to pay off the home loan, get the best rates and not worry about any of the features that may come with loans. The basic variable home loans will always some with the lowest interest rate offered by the provider.

 

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Disclaimer: At Finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.

4 Responses to Variable Rate Home Loans Comparison

  1. Default Gravatar
    haider | February 13, 2013

    Hi I like to buy a hose for $300,000 and I got 100,000 be honest i don’t know which home lone is good for me.

    • Staff
      Adrian | February 13, 2013

      Hi Haider,

      Thanks for your question. There is plenty to think about with a home loan. We have plenty of information on our website that can help you gain an understanding of what home loans. Each major page has a guide on the particular topic.

      If, by then you can’t work out what loan will work for your needs, it may be worth considering using a mortgage broker, accountant and/or financial planner.

      Cheers, Adrian

  2. Default Gravatar
    Li | April 2, 2013

    Hi, Im a first-home buyer. I just moved to this country. I have about $100000 deposit. My salary is 2500 per month. I hope to buy a one-bedroom or two-bedroom apartment for private use. How much can I borrow because I need to set my budget? I’m a resident can I claim first-home buyer allowance? thank you

    • Staff
      Shirley | April 2, 2013

      Hi Li,

      Thanks for your comment.

      You may want to use our borrowing power calculator to help you determine this. You could also be eligible for the First Home Owners Grant, but you need to be an Australian resident or permanent citizen. It’s best to log onto your state’s Office of State Revenue website to check your eligibility.

      Cheers,
      Shirley