Variable Home Loans

. 2 min read

A variable rate home loan is the most common form of home loan in Australia. The rate of your home loan is more or less determined by market interest rates. Meaning that throughout the life of your loan repayments will fluctuate depending on the official cash rate. Unlike a fixed term loan, variable loans are susceptible to market changes from the moment of commencement.

Variable rate home loans simply refer to home loans whose rate is determined by interest rates. However, there are in fact a range of different variable loans offered by lenders. We have listed some of the most common types below:

Basic variable home loans

This loan type has limited features such as no 100% offset accounts, although in return borrowers receive lower rates and fees. Basically, a ‘no frills’ version of the variable home loan.

The opposite of basic variable home loans. These loans offer a full range of features and extras, for example a 100% offset account and redraw capabilities.

Variable rate bad credit home loans

These loans are offered to borrowers with bad credit scores and usually incur higher fees and rates. Borrowers will likely be charged with Lenders Mortgage Insurance (LMI).

Variable rate package home loans

Package loans are available to borrowers who bundle all of their financial products under the same lender, such as your credit card and savings account. These loans offer discounted interest rates and fees in return.

Before committing to a variable rate home loan, it is useful to weigh up the pros and cons associated.


  • Lack of Exit Fees – unlike fixed term loans you will not be charged with fees if you wish to exit your loan before the specified end date. This makes it much easier to refinance and secure either a more competitive rate or unlock equity in your home.
  • Decreasing Interest Rate – if interest rates fall having a variable rate home loan will make it easier to service your loan as your repayments will also decrease.
  • Features and Flexibility – offset accounts, redraw facilities and early and additional payments are just a few of the features that make variable home loans much more flexible than fixed rate.


  • Lack of Repayment Certainty – it is difficult to forecast the direction of interest rates and regular fluctuations means that your repayment amount is always changing. Therefore, variable rates are far more difficult to budget for.
  • Increasing Interest Rate – due to the size of your home loan even a slight increase in interest rates can make your repayments far more expensive.