Variable Rate Home Loans from 5.99% p.a.

Why Choose a Variable Rate Home Loan?

Variable rate home loans are the most popular choice for Australian borrowers, and for good reason. They offer a level of flexibility that fixed rate loans simply cannot match. The ability to make extra repayments without penalty, access an offset account, use a redraw facility, and refinance at any time without break costs gives you complete control over your mortgage.

The flexibility of a variable rate loan becomes particularly valuable when your financial circumstances change — which they inevitably do over a 25-30 year loan term. If you receive a bonus, inheritance, or tax refund, you can immediately apply it to your loan balance and start saving on interest. If you need funds for an unexpected expense, your redraw facility provides instant access to any extra repayments you have made.

Variable rate loans also benefit from RBA rate cuts. When the Reserve Bank lowers the cash rate, lenders typically pass on some or all of the reduction, lowering your repayments or accelerating your principal reduction. While rates can also increase, the overall trend of rates over time and the flexibility benefits make variable loans the preferred choice for borrowers who want to actively manage their mortgage.

Offset Accounts: Your Most Powerful Savings Tool

An offset account is arguably the most valuable feature of a variable rate home loan. It is a transaction account linked to your mortgage where the balance reduces the loan amount on which interest is calculated. Unlike a savings account where you earn interest and pay tax on those earnings, an offset account effectively earns your home loan rate tax-free.

Consider the mathematics: if you have a $600,000 loan at 6.29% and maintain an average offset balance of $80,000, you save approximately $5,032 per year in interest. Over a 30-year loan, this could save you more than $150,000 in interest and cut several years off your loan term. Because you are saving on interest rather than earning it, there is no tax payable on this benefit — making it more effective than a savings account, which would require you to earn approximately $7,000 before tax to achieve the same benefit (assuming a 32.5% marginal tax rate).

The offset account functions as a normal everyday transaction account. You can use it for your salary deposits, everyday spending via debit card, direct debits, and transfers. Your salary sits in the offset from payday until you spend it, reducing your loan interest during that time. Even maintaining a modest average balance generates meaningful savings over the life of the loan.

Extra Repayments and Redraw

Making extra repayments is one of the most effective strategies for paying off your home loan faster. Every dollar paid above the minimum repayment goes directly to reducing your principal balance, which means less interest is charged in subsequent periods. The impact compounds over time, producing dramatic savings.

For example, on a $600,000 loan at 6.29% over 30 years, your minimum monthly repayment is approximately $3,714. If you increase your repayment to $4,214 — just $500 extra per month — you will save approximately $195,000 in total interest and pay off your loan almost 7 years early. That $500 per month is working incredibly hard for you.

The redraw facility provides a safety net for these extra repayments. If you have been making additional payments and an unexpected expense arises — car repair, medical bill, or home maintenance — you can redraw some or all of those extra funds. This removes the anxiety of committing extra money to your loan, because you know it remains accessible if needed.

Some lenders impose minimum redraw amounts (typically $500), may charge a small redraw fee, and may take 1-3 business days to process. Others offer instant redraw through internet banking at no cost. We compare these features when recommending lenders.

Basic Variable vs Feature-Packed Variable

Within variable rate loans, there is an important distinction between basic (no-frills) products and feature-packed (standard) products. Basic variable loans offer a lower interest rate — typically 0.10% to 0.30% less than the feature-packed equivalent — but strip away some or all of the premium features.

A typical basic variable loan might exclude the offset account entirely, limit extra repayments or charge a fee for redraw, and may not offer a separate loan split option. In return, you get the lowest possible interest rate, which can save meaningful amounts on large loan balances.

A feature-packed variable loan includes a full 100% offset account, unlimited free extra repayments, free and instant redraw, the ability to split into multiple sub-accounts, and potentially a linked credit card with rewards. The slightly higher rate is the cost of this flexibility.

The right choice depends on your usage patterns. If you maintain a significant offset balance (say $50,000+), the interest savings from the offset account will likely exceed the rate premium of the feature-packed product, making it the better overall value. If you plan to set and forget your repayments without using additional features, the basic variable offers the lowest cost.