Getting a variable rate home loan means that the rate on your monthly mortgage repayment could change at any time. However, these loans also come with beneficial features like the ability to redraw or make additional repayments to give you flexibility when your financial circumstances change.

Below, we take a closer look at how variable rate loans work and some of the best mortgage products with the lowest interest rates in 2021.

What is a variable rate home loan?

A variable rate home loan is a type of loan where the interest rate fluctuates in response to overall market trends and decisions made by the Reserve Bank of Australia.

This means when interest rates go down, borrowers can enjoy the advantage of paying lower monthly repayments. On the flip side, you should be prepared to afford higher loan repayments if the rates go up.

By contrast, a fixed rate home loan allows you to lock in a specific rate for a set period depending on your mortgage lender. The fixed term is typically between one and five years, after which the loan will roll over to a variable rate.

Also read: Australia's 10 biggest mortgage lenders in 2021

How is my variable interest rate calculated?

Your loan balance is typically multiplied by the interest rate and then divided by the 365 days in one financial year. The resulting figure is your daily interest charge.

To get your monthly interest charge, multiply the daily interest by 30. Then, divide this amount according to your preferred payment frequency, whether it’s monthly, fortnightly, or weekly.

For example, if you have a loan balance of $400,000 with a current interest rate of 4.9%, your repayment calculation for the month of November may look like this:

  • $400,000 x 0.049 / 365 = $53.70
  • $53.70 x 30 days in November = $1,611 interest for November

You can use our mortgage calculators to estimate your interest charges and repayment costs over the life of the loan. Moreover, these calculators may help forecast how making additional repayments will affect your monthly housing costs.

With these in mind, here are the best variable rate home loans in Australia as of July 2021. We’ve also included the benefits, comparison rate, and maximum allowable loan to value ratio (LVR) for each.

Note that these are for comparative purposes only since you may have a different quote depending on your financial situation and prospective home price.

Finally, the rates on this list are based on a $500,000 owner occupier loan with a term of 25 years and cover repayment of both principal and interest.

Also read: Which big bank offers the lowest variable rate after the RBA cut?


  • Interest rate: 1.85%
  • Comparison rate: 2.21%
  • Maximum LVR: 80%
  • Minimum loan amount: $50,000
  • Estimated monthly repayment: $2,083

The Smart Booster Discount Variable mortgage from comes with unlimited additional repayments and free redraws.

Moreover, you can avail of an offset account to reduce the amount of interest that you have to pay in the long run. The cost per account is equivalent to an additional 0.10% interest rate.

Since this lender is 100% online, borrowers enjoy zero application, monthly, ongoing, and discharge fees. also offers an expansive range of loan products like car loans, investment loans, and owner occupier mortgages.

Furthermore, this lender has won several business awards in recent years for its reduced overhead fees, faster pre-approval, and low variable interest rates. However, has no physical branches for customers who want to discuss their options with a loan advisor.

2. U Bank

  • Interest rate: 2.34%
  • Comparison rate: 2.34%
  • Maximum LVR: 80%
  • Minimum loan amount: $100,000
  • Estimated monthly repayment: $2,203

U Bank’s Owner Occupier Discounted Rate Loan is suitable for customers who plan to borrow at least $100,000. It comes with a one-off fee of $395 with no monthly or annual ongoing fees.

Additionally, the lender grants an unlimited number of redraws and loyalty discounts for eligible home occupier and refinance borrowers.

Operating since 2008, U Bank is another digital lender and a division of the National Australia Bank headquartered in Melbourne.

Unlike their fixed rate offerings, U Bank allows extra repayments without additional fees and redrawing funds with a minimum of $100 per transaction.

Similar to, processing times are faster and overhead expenses are lower because the application is done online. Customers can also manage their payments and track their balances through U Bank’s mobile app.

Also read: Ten things you need to know about an offset account

3. Macquarie Bank Limited

  • Interest rate: 2.39%
  • Comparison rate: 2.39%
  • Maximum LVR: 60%
  • Minimum loan amount: $150,000
  • Estimated monthly repayment: $2,215

Macquarie is the nation’s fifth biggest mortgage lender in terms of market cap, closely following Australia’s big four banks.

One of this lender’s most popular products is the Basic Home Loan which is suitable for buyers looking to purchase an established property or build a house.

It comes with a flexible loan structure and free redraws, as well as zero ongoing fees. Furthermore, Macquarie allows clients to borrow up to $5 million and choose a maximum home loan term of 30 years.

The bank also offers forex, money market trading, and investor loan products.

Additionally, Macquarie is the only lender on this list that allows you to earn Qantas Points over the life of the loan.

4. Great Southern Bank

  • Interest rate: 2.49%
  • Comparison rate: 2.54%
  • Maximum LVR: 80%
  • Minimum loan amount: $100,000
  • Estimated monthly repayment: $2,241

Primarily designed for first home buyers, the Great Southern Bank’s Basic Variable loan comes with unlimited additional repayments, free redraw, and no recurring fees. There is also no minimum redraw amount.

Just note that there is an application fee of $600 and a discharge fee of $500.

You may start your application using the bank’s online platform and wait for a mortgage specialist to contact you. You can also opt to apply in person through the nearest branch.

Formerly Credit Union Australia (CUA), the Great Southern Bank is the biggest customer-owned banking institution in Australia. It is also an authorised deposit-taking institution (ADI) regulated by the Australian Prudential Regulation Authority.

Headquartered in Brisbane, the bank has more than 40 branches nationwide with the majority located on the east coast of Australia.

5. Aussie

  • Interest rate: 2.24%
  • Comparison rate: 2.27%
  • Maximum LVR: 80%
  • Minimum loan amount: $10,000
  • Estimated monthly repayment: $2,178

Aussie is a Sydney-based retail financial services company that offers home loans, personal loans, mortgage broking, and insurance products nationwide.

This lender’s newest variable rate home loan called the Aussie Edge has no ongoing fees and allows extra repayments and free redraw facility.

Moreover, you can create multiple offset accounts for only $10 per month to reduce your costs in the long run.

You can conveniently apply via the online platform called Aussie Online with no application fees. Live webchat and phone support are available as well.

Take note that the loan comes with a discharge fee at the end of its term and upfront fees may be higher than average, according to RateCity.

Also read: Surprising fees and charges when settling a loan

6. Adelaide Bank

  • Interest rate: 2.29%
  • Comparison rate: 2.33%
  • Maximum LVR: 80%
  • Estimated monthly repayment: $2,191

Adelaide’s SmartSaver variable rate home loan is suitable for individual, joint, and first time buyers who are looking to buy an owner occupied property.

This mortgage product comes with a standard application fee of $299 and a settlement fee of $199, but has no monthly administration fees.

Furthermore, you can redraw online or through the mobile app with a minimum amount of $1. You may also make unlimited extra repayments without penalty.

Regarding the lender, Adelaide Bank offers conventional banking services, credit cards, mortgage loans, and insurance products nationwide.

Adelaide Bank merged with Bendigo Bank in 2007 and is now among the biggest mortgage lenders in Australia in terms of gross residential mortgage lending.

7. ING Bank Australia Limited

  • Interest rate: 2.49%
  • Comparison rate: 2.52%
  • Maximum LVR: 80%
  • Minimum loan amount: $500,000
  • Estimated monthly repayment: $2,241

Like most variable rate home loan products, ING’s Mortgage Simplifier program comes with no recurring fees and provides the option for making extra repayments.

The program also offers a $3,000 cashback promo if you refinance your eligible home loan to ING. However, the minimum loan amount is $500,000, the highest among other lenders on this list.

ING Australia has its headquarters in Sydney and is an Australian subsidiary of the Dutch multinational company ING Group. It is the largest direct savings bank in the country and the sixth biggest by gross mortgage lending.

Moreover, ING Australia is an online-only lender like, so you can potentially save on lower overhead costs and enjoy faster transactions.

Johnson DamianJohnson Damian
SEO Content Writer at Key Media
Johnson Damian is an SEO writer at Key Media. He was a Geographic Information Systems specialist and college instructor before he started writing stories for Your Mortgage. When he's AFK, Johnson is probably attempting his next PlayStation platinum.