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.
・Repayments may increase if interest rate rises
・It could be harder to budget for the future as you can’t be sure how interest rates might rise
・Help you save on the interest you pay
・Plan for the future and set financial goals with confidence
・Lock in your interest rate so you know what your repayments will be
・Protect yourself against interest rate rises
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.
"Any advice provided on this blog is general in nature. Readers are urged to seek their own professional advice before making decisions."