The pros and cons of a variable rate home loan

When you take out a mortgage, you will choose a variable, fixed or split interest rate. We’ll look at the pros and cons of a variable rate home loan.


A variable home loan is a loan in which the interest rate varies over time. It can go up or down depending on the market and the Reserve Bank of Australia’s official cash rate.


The advantages of a variable rate home loan include:

  • Flexible loan features – Home loans with a variable rate often come with features such as an offset account or redraw facility. These offer flexibility around your repayments, such as paying extra to reduce the loan amount.
  • Interest rate cuts ­– If your interest rate drops, your repayments will go down, so you’ll pay less.
  • Ease of switching loans ­– Want to refinance to get better a deal? You can do this easily if you have a variable home loan. Because you’re not locked into a contract, you can switch loans or lenders without paying a break fee.


The disadvantages of a variable rate home loan include:

  • Interest rate rises – If your interest rate goes up, your mortgage repayments will increase. It can mean paying more than you expected.
  • Budgeting challenges – Your monthly repayments may change at any time, which can make budgeting or planning for expenses challenging.

When deciding if a variable rate mortgage is right for you, consider your financial situation and personal behaviour and lifestyle.

You might prefer a fixed rate mortgage if you want certainty over your monthly repayments. However, a variable rate home loan may be best if you want to make extra repayments without any restrictions or caps.

In some ways, you can access the best of both worlds with a split loan. This lets you lock in a fixed rate on a portion of our loan for a period – typically between one and five years – while the remainder has a variable rate.


Our team can help you decide if a variable home loan is right for you. We’ll also help you find a mortgage with competitive charges and fees, and flexible features, if that’s what you’re seeking. Get in touch with us today to understand your options.

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