Right now in Queensland, home loan interest rates are still adjusting in response to the RBA’s efforts to control inflation. 

In places like Logan, where property prices remain more affordable than in Brisbane but are rising steadily, buyers and investors are watching the market closely. For many, a variable-rate loan is on the table, offering flexible repayments that move with interest rate changes. 

A variable-rate loan can offer short-term savings or better cash flow, but it also comes with some uncertainty. Knowing how it works helps you plan ahead and avoid surprises, whether you’re buying your first home or investing in property.

Here’s what you need to know, broken down in simple terms.

What Is a Variable Rate Loan?

A variable-rate loan is a type of loan where the interest rate can change based on movements in the broader interest rate environment. The lender adjusts the rate in line with the Reserve Bank of Australia’s (RBA) cash rate decisions or other market factors.

How it differs from a fixed-rate loan

In a fixed-rate home loan, the interest rate stays the same for an agreed period, usually 1 to 5 years. This offers stability in monthly mortgage repayments. In contrast, a variable-rate loan changes with the market. If the RBA cash rate drops, you might pay less interest. If it rises, your repayments go up. There's also no rate lock.

Common types

• Home Loans: The most common type. Many Australian borrowers opt for a variable-rate home loan to take advantage of potential rate cuts.
  
  
• Personal Loans: Useful for debt consolidation or major purchases. Rates may fluctuate during the loan term.
  
  
• Student Loans: Although less common in Australia, some private student loans can have variable interest rates.
  
  

Talk to Our Brokers Who Know Variable Rates Inside Out.  Planning to buy in Logan, but not sure if a variable-rate loan is right for your situation? Our Logan mortgage brokers at Cube Loans can explain the pros, cons, and real numbers so you can make a confident choice. Call us today for a free chat at 1800 774 756. 

How Does a Variable Rate Loan Work?

How the interest rate is determined

Variable home loan interest rates are typically set using an index (such as the RBA official cash rate) plus a margin set by the lender. This margin considers factors like loan purpose, loan-to-value ratio (LVR), and credit profile.

Frequency of rate adjustments

Lenders can change your interest rate at any time, but it usually happens in response to the RBA cash rate changes. Rate rises or rate cuts can occur monthly, depending on economic factors like inflation or changes in the wholesale market swap rate.

Impact on monthly payments over time

When the interest rate rises, your monthly mortgage repayments go up. If the rate falls, you pay less. This affects your cash flow and long-term budgeting. Variable-rate loans are less predictable than fixed-rate loans, but they can offer more flexibility.

Example scenario

Let’s say you take out a variable-rate home loan with the following details:

• Loan amount: $500,000
  
  
• Starting interest rate: 5.50%
  
  
• Monthly repayments: approx. $2,840

Now imagine the RBA increases the cash rate, and your lender adjusts your variable rate to 6.00%:

• New interest rate: 6.00%
  
  
• Updated monthly repayments: approx. $2,998
  
  
• Increase in repayments: $158 more per month

This example shows how even a small change in interest rates can impact your monthly mortgage repayments under a variable rate loan.

Pros and Cons of a Variable Rate Loan

Variable-rate loans can be a smart choice in the right circumstances, but they’re not for everyone. Before locking anything in, it’s worth weighing up the benefits and the risks.

Pros

• Lower starting rates: Often cheaper upfront than fixed-rate loans, which can help with early cash flow.
  
  
• Extra repayments allowed: Make additional repayments at any time without penalties, helping reduce interest over time.
  
  
• Redraw facility access: Easily withdraw any extra repayments you've made if you need the funds later.
  
  
• Offset account options: Link a savings or transaction account to reduce interest charged on your home loan.
  
  
• No break fees: Refinance, sell, or pay off your loan early without worrying about break costs.
  
  
• Benefit from rate cuts: If interest rates drop, your repayments may go down too.
  
  

Cons

• Unpredictable repayments: Your monthly costs can rise unexpectedly if interest rates increase.
  
  
• Budgeting is harder: Less repayment certainty makes long-term planning trickier.
  
  
• Higher costs over time: If rates keep rising, you could end up paying more than with a fixed-rate loan.
  
  
• Less peace of mind: For some, the uncertainty of rate changes can cause financial stress.

Ideal Borrowers

Variable-rate loans suit people who:

• Expect interest rate cuts or stable rates
  
  
• Can manage rate rises
  
  
• Want flexible repayment options like interest-only repayments or access to redraw funds

When to Choose a Variable Rate Loan

Choosing a variable rate loan isn’t just about chasing a lower interest rate; it’s about matching the loan to your financial goals and situation. Here’s when it might make the most sense:

• You expect interest rates to drop: If the RBA is tipped to lower the cash rate, you could benefit from reduced monthly repayments.
  
  
• You want repayment flexibility: Variable loans often allow extra repayments, interest-only periods, and access to redraw or offset facilities.
  
  
• You plan to sell or refinance soon: With no break costs, variable loans are more flexible if you're not staying in the property long-term.
  
  
• Your cash flow can handle rate rises: If you have room in your budget to absorb higher repayments, the potential benefits may outweigh the risks.
  
  
• You’re splitting your loan: Many borrowers use a split loan, part fixed, part variable, for a balanced approach.

Buying or Investing in Logan? Let Our Brokers Find the Right Loan for You.  Whether you're entering the market or expanding your portfolio, our Logan mortgage brokers at Cube Loans can match you with the best loan type, whether fixed, variable, or split, based on your strategy. Reach out to us today at 1800 774 756. 

FAQs

What is the main difference between a variable and a fixed-rate home loan?

A fixed-rate home loan locks in the interest rate for a set period, offering repayment certainty. A variable-rate loan changes with market rates, offering more flexibility.

What affects variable interest rates in Australia?

The RBA cash rate, inflation, lender costs, and broader economic conditions all influence variable interest rates.

Can I make additional repayments on a variable-rate loan?

Yes, most variable loans allow extra repayments without early repayment fees, helping reduce interest charges.

Is it a good idea to get a variable-rate loan?

It can be, depending on your financial goals and how comfortable you are with potential interest rate increases. A variable-rate loan gives you more flexible loan features like extra repayments, redraw access, and offset accounts. It’s often a good fit if you're comparing different loan options and want the ability to adapt over time.

What is the biggest downside to variable-rate loans?

The main downside is uncertainty. Interest charges can rise if rates go up, which affects your repayments. This can make budgeting harder, especially if you’re not prepared for changes. Also, some lenders may charge redraw fees, a monthly fee, or early repayment fees, depending on the structure of the loan.

Is 7% interest on a loan high?

It depends on the comparison rates and loan type. Right now, 7% is high for a home loan but typical for an interest-only loan or unsecured loan. Always compare offers across financial institutions and look past the headline rate. Check the application fee, ongoing costs, and total repayment amount.

What is the current variable loan rate?

Variable loan rates change frequently, often influenced by RBA cash rate decisions. Most lenders update their rates monthly or after an RBA move. To get the most accurate rate and compare loan options, look at advertised rates from major lenders and always review the comparison rates, not just the base rate.

What happens if interest rates rise significantly?

Your monthly repayments will increase, impacting your cash flow. That’s why it’s important to assess your ability to handle interest rate increases.

Conclusion

A variable-rate loan can offer flexibility, useful loan features, and potential savings, especially if interest rates fall. But it also requires careful planning, as future interest rate increases could affect your repayments. 

If you're planning to buy a home or invest in property in Logan, our local brokers at   Cube Loans can help you find the right loan with the best mix of features, from offset accounts to redraw access. We'll walk you through your loan options, explain the real costs using comparison rates, and help you avoid hidden fees like application fees or redraw fees.

Call us today at 1800 774 756 to speak with a Logan-based broker who knows the market and what matters most to you.