Home News Standard Variable Rate Loans

Standard Variable Rate Loans

Font size :

Like its basic no-frills counterpart, standard variable loan products move up and down with the official cash rate set by the Reserve Bank of Australia. When the RBA alters the official cash rate most variable home loan interest rates change by a similar, if not identical, amount. However, the major banks have recently moved out of sync with the RBA and have raised their mortgage rates higher than the official rate rise. For example, Westpac increased its standard variable rate by almost double the rise amount after one of the recent RBA rate hikes.

Borrowers with a variable interest rate will be relatively better off than borrowers with a fixed interest rate when interest rates fall, because their variable rate is likely to move lower while the fixed rate will remain unchanged.

Standard variable is like the cheeseburger of the loan world and is the most sought-after because it’s easy to compare in terms of rates, and it comes with all of the bells and whistles that you can imagine.

Those bells and whistles can include offset accounts – where you place any savings in an account that is linked to your loan, to ‘offset’ the amount of interest you pay. If used properly, this facility can help you reduce the interest you pay and shorten the loan term. At the very least, standard variable loans allow you to make extra repayments and offer a redraw facility.

Standard variable mortgages are ideal for all borrowers and first homebuyers can greatly benefit from their flexible features. However, they can be more expensive than the basic variable loans.

First homebuyers opting for standard variable loans should ensure they can service their loans should rates increase. Allow for at least a 2% rise when budgeting for repayments.

Upsides:
As the name indicates, the rates for these loans will fluctuate in line with the official Reserve Bank of Australia cash rate, on which lenders base their individual interest rates. Most lenders allow standard variable borrowers to make extra repayments and access offset or line of credit facilities.

Standard variable rates are extremely competitive with fixed rate loans – you may get a much better deal if you stay variable. These loans allow you to take advantage of lower interest rates when official rates fall.

Downsides:
On the flipside, you also pay the price if rates increase, although some variable rate loans can be capped so the rate will not rise beyond a certain point.

Suitable for:
All types of borrowers, from first homebuyers to investors who can allowfor a marginal rate increase, but who wish to benefit if rates  decrease.

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Mortgage News and Articles

Choosing the right mortgage is hard for many first-home buyers Choosing the right mortgage is hard for many first-home buyers

Many feel overwhelmed by the sheer range of products and interest rates on offer, a new survey reveals Read more

Mortgage applications drop in second quarter Mortgage applications drop in second quarter This marks the “beginning” of a downward trend, says Equifax executive ... Read more

To break monopoly, many smaller lenders could become banks To break monopoly, many smaller lenders could become banks The proposed change could break the Big Four’s monopoly over the mortgage market and help families get cheaper home loan rates ... Read more

Borrowing against the home: A strategy to pay for aged care Borrowing against the home: A strategy to pay for aged care Such debts can generally be divided into long-term and short-term loans ... Read more

More mortgage news and articles

Sponsored Links

Monday, Jul 24, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Whether you're a first homebuyer, looking to refinance, or investing, it's important to have the right loan for your needs. Just fill in a few details below and one of our trusted mortgage advisers will contact you.

A quick & easy way to find the right home loan
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords