Using Finder's comparison tables you can compare multiple features of variable rate home loans. Here's what to look out for:
The first thing to look at is the interest rate, as this will determine how much your repayments will be. The lower the rate, the better: noting that the rate will fluctuate throughout the life of your loan and could go higher. But remember that the interest rate should not necessarily determine your decision alone.
You may be drawn in by a particularly low interest rate, but make sure you look at the comparison rate too. This rate takes into account any additional fees and charges attached to the loan, meaning it provides a more accurate reflection of the interest rate you'll pay. Note that the comp rate is always based on a loan value of $150,000, so it's now always the most accurate reflection of your situation, but it's a good guide.
If the comparison rate is much higher, take a look at the fees and charges included. The key ones to watch out for are application fees, monthly or ongoing fees and settlement fees.
Take a look at whether your variable rate home loan will come with features like an offset account or redraw facility.
Most lenders offer multiple variable rate home loans. But which type is best for you?
A variable interest rate home loan is a loan where the repayments can rise or fall each month, depending on whether the lender decides to change the interest rate. This is the opposite of a fixed rate home loan, which remains the same for a set period of time.
A variable rate loan can change at any time. In 2022 lenders increased their variable rate loans 8 times! However, these loans almost always have lower interest rates than fixed rate loans.
There are no break fees for exiting a variable rate loan early and these loans are much more likely to come with offset accounts or let you make extra repayments.
A fixed rate won't change (until the fixed period ends). This gives you certainty in knowing what your repayments will be. However, you will likely have a higher interest rate because of this.
Exiting a loan during the fixed period incurs a break cost. Depending on your loan size and how long you've fixed for, this can cost hundreds or even thousands of dollars.
This simple graph shows how the lowest variable rate loan compares to the lowest fixed rate loan.
Most of the time, variable rates are the market's lowest rates. But sometimes fixed rate loans can become lower than variable rates loans.
Fixed vs variable rates: What are the differences?
Australian borrowers don't have to pick between variable and fixed. Many lenders allow you to split your loan into fixed and variable portions.
Lenders are free to move your variable interest rate up or down whenever they want. In practice, lenders move rates in response to wider market and economic conditions.
While you can't really predict rate changes perfectly, it is possible to get a good sense of which direction rates are moving in.
The Reserve Bank of Australia (RBA) sets the official cash rate each month. This is a benchmark for lenders to set interest rates on variable rate home loans.
The RBA lowers interest rates to stimulate economic growth and encourage spending. When inflation is high, the RBA raises rates to cool spending and drive prices down.
The RBA began lifting the cash rate in May 2022 and has not stopped since. This has meant that anyone on a variable interest rate has seen their mortgage rates rise too.
While most economists predict that interest rates will stop rising some time in 2023, we likely haven't hit the peak yet.
The lowest variable home loan rate on Finder is 5.59%.
The average variable home loan rate on the market is 6.74%.
Interest rates are still rising in 2023. And some lenders are now setting fixed rates below their variable rate loans (not all lenders are doing this). This means you could lock in a slightly lower fixed rate.
But keep in mind that lower fixed rate loans may suggest lenders believe that variable rates will start to fall soon.
You can never really pick rate movements or beat the banks here. When deciding between fixed and variable it's more important to think about how comfortable you are with the current rate and whether you can afford more rate rises. Some borrowers value the certainty of fixing more than getting the absolute lowest rate.
The best variable rate home loan depends on your requirements as a borrower. But in general you want a loan with a low rate, low fees and features you need.
With any home loan, a lower interest rate makes for a better home loan. A lower rate means lower repayments and it makes your home loan cheaper.
Here's a quick example using the same loan amount but with a 0.30% difference in the rate:
| Details | Higher rate | Lower rate |
|---|---|---|
| Loan amount | $600,000 | $600,000 |
| Loan term | 30 years | 30 years |
| Interest rate | 5.65% | 4.85% |
| Monthly repayments | $3,464 | $3,167 |
| Savings (monthly) | N/A | $297 |
| Savings (yearly) | N/A | $3,564 |
You can use a repayment calculator to see the difference between various rates or check the repayment column in the loan table above.
A variable rate home loan can come with a range of fees. If the loan works for you and the interest rate is low, a few fees aren't so bad. But if you can avoid fees then why pay more?
Even the lowest rate on earth is not very useful if you have the wrong loan type. If you're looking to finance an investment property then you will need an investment loan. If you're buying or refinancing a loan for the home you live in then you need an owner-occupier home loan.
Variable loans often come with useful features that give you more control over your mortgage.
Every month we look at all the variable rate home loans offered by our commercial partners at Finder. We evaluate these loans based on their interest rates, fees and minimum deposit size.
Our top picks are divided into 3 categories based on different borrowers' needs: first home buyer, refinancer and investor.
| 5.59 | % p.a. |
| 5.50 | % p.a. |
| 5.74 | % p.a. |
| 5.75 | % p.a. |
| 5.89 | % p.a. |
| 5.80 | % p.a. |
Keep in mind that these top picks are chosen from our commercial partners and not the entire home loan market. Based on your personal circumstances, there may be better loans for you than the ones we've highlighted here. Always compare your options before you apply.
Here are the details about our methodology:
You won't pay any more by taking out a home loan with us. Better still, we regularly run exclusive deals that you won't find on any other site – plus, our tables make it easy to compare loans.
We've researched and rated dozens of home loans as part of our Finder Awards. We provide unique insights and our in-house experts regularly appear on Sunrise, 7News and SBS News.
Unlike other comparison sites, we're not owned by a third party. That means our opinions are our own and we work with lots of home loan lenders, making it easier for you to find a good deal.
Since 2014, we've helped 150,000+ people find a home loan by explaining the nitty-gritty details simply and clearly. We'll never ask for your number or email. We're here to help you make a decision.
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We have a current Reverse Mortgage with Bankwest which was established several years ago. Can you tell me what the current rate is we would be incurring and if it is a Variable Rate and any hidden charges involved.
Hi Keith,
Thanks for getting in touch! It is helpful to know that while we compare variable rate home loans on our page, we do not have the actual current rate is per lender and in this case, Bankwest. It would be best to get in touch with your preferred lender to obtain more information on monthly repayments.
Hope this clarifies! Feel free to reach out to us again for further assistance.
Best,
Nikki
I am wanting to consolidate all my outstanding into my home loan. I also want to change my financial institution to have a better lower interest rate. Also will it be better to have variable or fixed with what I am wanting to do? Please can you help?
Thanks
Hi NH,
Thanks for getting in touch with Finder. I hope all is well with you. :)
Let me address your concerns one by one.
1. I am wanting to consolidate all my outstanding into my home loan.
You may want to consider refinancing to consolidate debt. This type of home loan allows you to pay out your credit card and personal loans under your mortgage. Instead of paying off multiple debts, you pay off all of your debts with one home loan repayment each month. This also means your debts are only charged at a home loan interest rate – which can be much lower than a credit card or personal loan interest rate.
2. I also want to change my financial institution to have a better lower interest rate.
Please refer to the guide I shared with you above. When you’re on the page, please refer to the table under the subheading “Which lenders offer debt consolidation options when refinancing?” By doing so, you will see different financial institutions that might be able to help you.
3. Also will it be better to have variable or fixed with what I am wanting to do?
While we can’t provide personalised recommendations, it would be a good idea to know the difference between fixed and variable home loans.
On that page, you will know more about variable and fixed interest home loans, which include their advantages and disadvantages.
Finally, please speak to a mortgage broker to help you explore your different options. They have the right skills and knowledge to ensure you make the right decision.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
How many financial institution offer construction loans and what are things to look out for before choosing a financial institution.
Hi Safia,
Thanks for reaching out to Finder.
You may want to check out lenders from our Construction Loans page. It also includes tips and information on how to choose a construction loan and some other frequently asked questions which you can find at the bottom of the page.
Before applying, please ensure that you meet the eligibility criteria and requirements and to read the details, as well as the relevant Product Disclosure Statements/ Terms and Conditions of the option before making a decision and consider whether the product is right for you.
Once you’ve chosen a lender, you may click on “Go to Site” to be directed to their main website where you can start your application.
Best,
Maria
So I just re-financed my home to go to a cheaper rate at a diffrent bank and my property got valued at 600.000 when I only have 300,000 left on property so where does the other 300,000 go.can I take some for me and put in on top of the loan for eg: 50k for me then loan will be 350,000 instead of 300,000 since I don’t need the whole 600,000 to move over
Hi James,
Thanks for your question.
The difference of $300,000 is your home equity which you can use for investment purposes or for a wide variety of reasons such as pay up-front university fees for your children, for an extended overseas holiday, or home repairs and cosmetic renovations. For more details, please feel free to read our guide on refinancing home loans.
Cheers,
Liezl
Hi If I reach retirement age and still have a home loan of say $100000, what is the longest term you can pay interest only repayments?
Thanks
Carol
Hi Carol,
thanks for the question.
This will depend on the lender, as each will have its own unique lending criteria. It might be a good idea to consult a mortgage broker to find out the longest term available to you for your situation.
I hope this helps,
Marc.