A variable rate home loan can mean that your monthly mortgage payment rate could change at any moment. These loans offer flexibility, such as the ability to withdraw or make additional repayments in order to adapt to your financial situation.

We will be taking a closer look below at the operation of variable rate loans as well as the top mortgage products with the lowest interest rates to 2021.

What is a variable-rate home loan?

Variable rate home loans are a type of loan that fluctuates according to market conditions and other decisions made by Reserve Bank of Australia.

Borrowers will be able to enjoy lower monthly repayments if interest rates fall. However, higher interest rates can mean that you will have to be able to make more loan payments.

Fixed rate home loans, by contrast, allow you to lock in a rate for a certain period. This is dependent on the mortgage lender. The term of a fixed rate home loan is usually between one and five year. After that, the loan will be converted to a variable rate.

The 10 largest mortgage lenders in Australia for 2021

How is my variable rate calculated?

The interest rate is multiplied with the loan balance and divided by the number of days within a financial year. Your daily interest cost is the result.

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

If you have a $400,000 loan balance and a 4.9% interest rate, the monthly repayment calculation for November could look something like this:

  • $400,000 x 0,049 /365 = $53.70
  • $53.70 x 30-days in November = $1.611 interest for November

To estimate your interest costs and repayment cost over the life-of the loan, you can use our mortgage calculators. These calculators can also help you forecast the impact of additional repayments on your monthly housing expenses.

These are the top home loans with variable rates in Australia for July 2021. We’ve also included the benefits, comparison rate, and maximum allowable loan to value ratio (LVR) for each.

These are only for comparison purposes. Your financial situation and potential home price may impact the quote you receive.

These rates are based on a $500,000 owner-occupier mortgage with a term length of 25 years. They cover both principal as well as interest.

Which bank is offering the lowest variable rates after the RBA cut

1. Loans.com.au

  • Interest rate 1.85%
  • Comparison rate 2.21%
  • Maximum VAR 80%
  • Minimum loan amount: $50,000
  • Monthly estimated repayment: $2,083

Loans.com.au offers the Smart Booster Discount Variable Mortgage with unlimited additional repayments, and no redraw fees.

You can also use an offset account to lower the interest you pay over the long-term. An additional 0.10% interest is charged per account.

This lender is 100% online so borrowers don’t have to pay any application, monthly, ongoing or discharge fees.

Loans.coms.au provides a broad range of loan products including car loans, investment and owner-occupier loans.

This lender has been awarded numerous business awards for its lower overhead fees, quicker pre-approval and low variable interest rates. Loans.com.au doesn’t have any physical branches where customers can discuss their options with loan advisors.

2. U Bank

  • Interest rate 2.34%
  • Comparison rate 2.34%
  • Maximum VAR 80%
  • Minimum loan amount: $100,000
  • Monthly estimated repayment: $2,203

U Bank’s Owner Occupier Discounted Rate Loan is suitable for customers who plan to borrow at least $100,000. This loan is available for a single fee of $395 and has no ongoing or monthly fees.

In addition, eligible homeowners and refinance borrowers are entitled to unlimited redraws as well as loyalty discounts.

U Bank, a digital lender that has been in operation since 2008 and a division within the National Australia Bank, is based in Melbourne.

U Bank, unlike their fixed rate offerings allows for extra repayments and redrawing funds without additional fees.

Similar to Loans.com.au the online application allows for faster processing and lower overhead costs. Customers can also manage their payments and track their balances through U Bank’s mobile app.

Ten things you should know about an offsetting account

3. Macquarie Bank Limited

  • Interest rate 2.39%
  • Comparison rate 2.39%
  • Maximum VAR 60%
  • Minimum loan amount: $150,000
  • Monthly repayments estimated: $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.

The loan comes with no ongoing fees, a flexible loan structure, and no redraws. Macquarie clients can borrow up to $5,000,000 and have a maximum term of 30 year.

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

Macquarie is the only lender in this list that will allow you to earn Qantas Points throughout the loan term.

4. Great Southern Bank

  • Interest rate 2.49%
  • Comparison rate 2.54%
  • Maximum VAR 80%
  • Minimum loan amount: $100,000
  • Monthly estimated 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 no minimum amount that you can withdraw.

You should note that there is a $600 application fee and a $500 discharge fee.

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

The Great Southern Bank was formerly Credit Union Australia. The Australian Prudential Regulation Authority regulates it as an authorised deposit-taking bank (ADI).

The bank is headquartered in Brisbane and has over 40 branches across Australia, with most of them located on the east coast.

5. Aussie

  • Interest rate 2.24%
  • Comparison rate 2.27%
  • Maximum VAR 80%
  • Minimum loan amount: $10,000
  • Monthly repayments estimated: $2,178

Aussie is a Sydney-based company offering financial products and services, including personal loans, home loans and mortgage broking.

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

To reduce costs, you can also create multiple offset accounts at $10 per month.

Aussie Online is an online application platform that allows you to quickly apply with no fees. Support is also available via live chat and by phone

Please note that there is a disbursement fee at the end and upfront fees that may be higher than the average according to RateCity.

Remarkable fees and charges for settling a loan

6. Adelaide Bank

  • Interest rate 2.29%
  • Comparison rate 2.33%
  • Maximum VAR 80%
  • Monthly estimated 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 has a $299 standard application fee and $199 settlement fee. However, there are no monthly administration fees.

You can also redraw online and through the mobile app for as little as $1. You can also make unlimited additional repayments without penalty.

Adelaide Bank is a lender. It offers traditional banking services, credit cards and mortgage loans.

In 2007, Adelaide Bank merged into Bendigo Bank and is now one of the largest residential mortgage lenders in Australia.

7. ING Bank Australia Limited

  • Interest rate 2.49%
  • Comparison rate 2.52%
  • Maximum VAR 80%
  • Minimum loan amount: $500,000
  • Monthly repayments estimated: $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.

Refinance eligible home loans to ING will qualify for a $3,000 cashback promotion. However, the minimum loan amount for this program is $500,000 which is the highest among all lenders.

ING Australia, which is a subsidiary company of the Dutch multinational ING Group, has its headquarters at Sydney. It is the country’s largest savings bank and sixth-largest by gross mortgage lending.

Moreover, ING Australia, an online-only lender, is similar to Loans.com.au. This means you could save money and get faster transactions.