Variable Rate Mortgages
Standard variable loans are designed to give you more flexibility. Variable rate home loans are subject to interest rate movements. They can change when the lender chooses to increase or decrease the rate, generally in line with the Reserve Bank of Australia's cash rate.
Variable Interest Rates Standard variable interest rates can be whatever the bank chooses, so there is not one 'standard' rate, instead different lenders have different 'standard' rates. The one most commonly referred to however is the standard variable rate of the major lenders. While the RBA may cut the official cash rate, this does not necessarily translate into a rate cut on your standard variable loans. The degree to which rate cuts are passed on varies among the different lenders. For individual lender comparison rates on current standard variable loan products, you will need to either talk to a mortgage broker, or research and compare the loans yourself.Standard Variable RateStandard variable home loans usually offer lower interest rates than a fixed rate loan. But, as the rate is variable, this means that your rate can go up if interest rates rise over the term of your loan. If interest rates rise, your repayments go up also, meaning that you will be paying more each month to repay the loan.
However, if rates are cut, your interest rate should come down also and your repayments will be lower. If you have fixed your rate an interest rates fall significantly, you would not be able to reduce your rate and will be paying much higher rates than home owners who are on a variable rate. Standard variables come with extra benefits such as early repayments, redraw facilities and fortnightly repayments.
Basic Variable Rate This is the no frills type of home loan. Usually offering the lowest rates of any home loan, the basic variable home loan come with less benefits than a standard home loan, so you may not be able to make early repayments without being charged a fee. However, your interest rate is still subject to change, either up or down depending on what the market is doing.
Split RateCan't choose? Want a fixed and variable interest rate that gives you the best of both worlds? You can choose to 'lock-in' interest rates on part of the loan by selecting a fixed rate while still allowing for flexibility by keeping part of the loan on a variable rate.
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