A Variable Interest Rate is the default interest option and is the most common.
Variable Interest Rate = Standard Variable Interest Rate - (Interest Rate Discount)
The Standard Variable Interest Rate can change for any reason and is at the complete discretion of the lender.
The Interest Rate Discount is fixed for the life of the loan however the amount lenders are willing to discount will differ over time.
How is the Standard Variable Rate determined?
Lenders take in account factors such as the RBA cash rate, their own costs and profit margins and changes in the rate are no longer solely based upon the RBA cash rate.
All lenders frequently change their variable rates out of step with RBA cash rate.
Find out if your Interest Rate Discount remains competitive.
A fixed rate home loan is where an interest rate can be locked in for a certain period of time, usually 1-5 years. The rate remains constant throughout that period, even when the cash rate is changed by the RBA.
A fixed rate home loan can provide peace of mind with certainty of repayment amounts during the fixed interest rate period. This can be beneficial if variable interest rates during the period are higher than the fixed rate. However, it can also mean that it will cost you more if interest rates during the period are lower.
A split loan combines interest rates from fixed and variable rates. The interest rate of a loan is split between a fixed and a variable rate.
Most lenders that offer a fixed rate loan also offer split loans.
An introductory rate loan "Honeymoon period" features a reduced interest rate at the start of a loan.
These loans are targeted at first-home buyers and usually last for 3 years.
At the end of the "Honeymoon period" the interest rate will automatically revert to the standard variable rate for the life of the loan.
These rates can help people get onto to the property ladder sooner and can also enable people to pay down the loan faster.
If your "Honeymoon Period"is over, now is the time to check your rate remains competitive!
As these loans rarely include any interest rate discounts of the Standard Variable rate (meaning you could be paying more than you need to for up to 27 years).