Variable Rate Home Loans
Variable home loan rates give you flexibility with the added benefit of extra features that save you money. Your variable interest rate will move up and down over time, loosely in line with the official interest rates set by the Reserve Bank.
There are two types of variable rate home loans; basic variable rates and standard variable rates. Your Loan Market mortgage broker will show you how to take advantage of the features of your loan to balance interest rate movements and minimise your loan costs.
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How do variable home loan rates work?
The Reserve Bank uses interest rates to manage people’s expenditure, and thereby inflation and the economy in general. The decision on when and if to move interest rates is based on a range of economic indicators, including the Consumer Price Index (CPI), wages data, jobless figures, the Producer Price Index (PPI) and the performance of global financial markets. Your variable rate is loosely based on the official interest rate, however in recent times we have seen that lenders are free to move their variable rates independent of official Reserve Bank movements.
Standard variable home loan rates
Standard variable home loan rates offer borrowers flexibility with a range of optional features – such as redraw, extra repayments or access to a line of credit – in exchange for a slightly higher interest rate than a basic variable home loan rate. This range of features can help you to reduce the overall term and cost of your loan, making standard variable home loan rates the most popular choice of loan in Australia. Standard variable home loan rates are suitable for a broad range of borrowers.
Basic variable home loan rates
Basic variable home loan rates offer fewer features and flexibility than a standard variable home loan, but this is offset by providing borrowers with lower repayments. The basic variable rate can be lower than the standard variable rate by sometimes as much as 0.5% per annum. Limited flexibility may be available on some basic variable home loan rate products, or you may be able to add certain popular features on a fee-for-feature basis, but this will depend on the lender and the loan selected.