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Standard and basic variable rates

With a variable mortgage the interest rate can change frequently, as the Reserve Bank of Australia (RBA) changes official cash rates, and along with whether the lenders funding costs change.  The rate that you pay when you take out the loan, will probably not stay the same throughout the loan, your lender may increase the rate, and you will pay more, or the interest rate may fall and you pay less in interest on the loan amount.

Standard variable rate home loans will often have features that include redraw facilities and the ability to make extra repayments.  You have a certain amount of flexibility over when and how often you make your repayments, and you can choose from a range of flexible options.  Borrowers can choose to combine a fixed loan with another, usually in the form of a split loan.

Basic variable rate home loans are the ‘no frills’ option for mortgages.  Often these loans come with lower interest rates than standard variable or fixed rate loans.  But, there is not much flexibility with basic variable rate loans and you may not be able to combine with any other loans.  So borrowers must weigh up whether a lower rate is more important than extra features before choosing which variable rate mortgage to choose.

Interest Rates keep falling.

Don't trust your home loan to a bank that isn't passing on falls in interest rates. Complete the form below to speak to your local mortgage broker about how much you might save.
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Advantages
You can save considerably if the RBA cuts rates as your home loan rate will likely drop too.  This means that you will pay a lower interest rate on the remainder of your loan amount which can save customers considerable amounts per month with each cut in rates.  Variable rates are usually lower than fixed rate, and the flexibility you have with your repayments enables you to have more control.  Fro example, you can make higher repayments than the minimum required, therefore saving on interest and shaving years off the life of your loan.   

Disadvantages
The main risk is that if interest rates go up, you will be left paying higher interest rates.  Your monthly repayment amount will increase just to cover the cost of the extra interest.  In a climate where rates are predicted to rise, a variable rate home loan may not be the best option, however if rates are set to fall then you may want to take the gamble and go for a variable rate.

If you can allow for a marginal rate rise in your budget, and are willing to take the risk in order to potentially save if rates go down, then a variable rate loan is suitable for you.

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