A variable rate mortgage is one of the most common types of home loans in Australia, and is also one of the most competitive products for lenders.
A variable rate mortgage gives you flexibility and the ability to capitalise on changes in the economy that lower the interest rate which is several types of variable rate mortgages, including standard variable, discounted rate, and tracker rate.
The interest rate you pay variable rate mortgages can go up and down in line with the Reserve Bank of Australian (RBA) base rate. Although they do not offer protection from future rate increases, they will allow you to benefit from cheaper payments when interest rates are low. However, when the RBA decreases the interest rate, your loan repayments may be reduced.
A variable rate home loan is a home loan product which has an interest rate which fluctuates up or down over time as your lender sees fit. Unlike a fixed rate home loan where the rate is locked in for a fixed term, the interest rate on a variable rate mortgage moves up and down by market changes.
Jack's family decide to select a Fixed / Variable Rate Mortgage. Jack has saved up a deposit and want to borrow $300,000 for a $600,000 apartment.
If they fix their rate for 30 years at 3.49% their repayment will be $1,345 per month.
If they choose a variable rate loan at 3.6% they will be repaying $1,372 per month at first. If the bank increases the variable rate by 0.5% to 4.1%, they will be repaying around $1,447 per month.
The information in this article is general in nature. Any advice it contains is general advice only and has been prepared without taking into account the objectives, financial situation or needs of any particular person.
The article content is not intended to be a substitute for professional advice and readers are urged to seek their own appropriate advice before making decisions.
Any reference to a particular investment is not a recommendation to buy, sell or hold the investment.