Variable Rate Home Loan | Bankwest Simple Home Loan (2024)

FAQs

What is a variable rate loan in simple terms? ›

With a variable-rate loan, the interest rate on the loan changes as the index rate changes, meaning that it could go up or down. Because your interest rate can go up, your monthly payment can also go up.

Table of interest rates for different home loan types of a NAB Base Variable Rate Home Loan. 6.84% p.a. 6.88% p.a.

A popular type of variable rate loan is a 5/1 adjustable-rate mortgage (ARM), which maintains a fixed interest rate for the first five years of the loan and then adjusts the interest rate after the five years are up.

Variable interest rates can go up to the point where the borrower may have difficulty paying the loan. The unpredictability of variable interest rates makes it harder for a borrower to budget. It also makes it harder for a lender to predict future cash flows.

From the borrower's perspective, a variable rate loan is beneficial because they are often subject to lower interest rates than fixed-rate loans. Most often, the interest rate tends to be lower at the beginning, and it may adjust in the course of the loan term.

Current rates:

The Standard Variable Mortgage Rate is 7.25%.

What is the standard variable rate? A standard variable rate, or SVR, is the interest rate that will be charged once an initial deal period on a fixed or tracker rate mortgage comes to an end. With an SVR mortgage, your mortgage payments could change each month, going up or down depending on the rate.

Five-year variable rates give borrowers the chance to pay lower rates in the future if interest rates fall, but if rates rise during the five-year mortgage term, their monthly payments could go up.

Fixing your mortgage for a set period means that you can ensure a large degree of financial stability. But going with a variable rate or tracker mortgage can mean your monthly outgoings may drop when interest rates come down.

FHA loans have made their mark as Federal Housing Administration-insured mortgages whose generous terms make homeownership accessible to many borrowers. They come with either a fixed or adjustable interest rate. The latter offers a lot of benefits, particularly a low introductory rate.

Is a FHA loan variable rate? ›

FHA offers a standard 1-year ARM and four "hybrid" ARM products. Hybrid ARMs offer an initial interest rate that is constant for the first 3-, 5-, 7-, or 10 years. After the initial period, the interest rate will adjust annually.

For example, if someone took out a loan with a variable rate of LIBOR + 5%, and LIBOR was at 3.58% at the time they took out the loan, then their variable rate would have been 8.58%. When the LIBOR rate changed to 1.82%, the variable rate then changed to 6.82%.

With a variable rate loan, your interest rate can rise or fall throughout the term of the loan. The interest rate a bank offers can be affected by a number of factors, including in part the official cash rate set by the Reserve Bank of Australia (RBA) as well as higher or lower funding costs for the lender.

A variable interest rate can fluctuate based on changes to index rates, like the prime rate. Credit cards and home equity lines of credit are two examples of loans with variable interest rates. A fixed interest rate typically doesn't change throughout the loan term.

A fixed rate loan has the same interest rate for the entirety of the borrowing period, while variable rate loans have an interest rate that changes over time depending on the market. Borrowers who prefer predictable payments generally prefer fixed rate loans, which won't change in cost.