Australia's Most Popular Home Loan

A standard variable rate is dubbed as the most popular home loan option for Australians.

There are many reasons why it is the preferred type of home loan. It is flexible, while remaining simple enough that even first-time borrowers can take advantage of its features.

Additionally, its fees are minimal, making it an excellent choice for those who want to purchase a home.

These loans offer great flexibility and come with various features including a redraw option, lump-sum repayments without penalties and 100% offset facility.

Family and Friends at a country home in Australia

What is a Standard Variable Home Loan Rate?

The standard variable rate, or SVR for short, is based on variable rates.

It means that its interest rate can fluctuate depending on the Reserve Bank of Australia (RBA) and its cash rate changes. It has a low-interest rate, and you can benefit from its many features.

Advantages of Standard Variable Rate

The primary reason why borrowers opt for a standard variable rate home loan is that the interest rates are lower than other types of home loan. Additionally, it comes with a variety of features, including:

  • Unlimited Extra Repayments

    You can pay additional repayments on top of the minimum monthly repayments. When you do so, you will not have to worry about the extra charges. For instance, you can add $500 to your $2,500 monthly repayments, and pay off your mortgage much sooner. You can go back to the minimum repayment amount the next month if you find that you can no longer make additional payments.

  • Redraw Facility

    With this facility, you can withdraw the repayments that you have paid for the loan. This can be useful if you find yourself in a temporary tight situation.

  • Offset Account

    A savings account can be attached to your loan, which can offset the interest of the amount you have borrowed. For example, your loan is $600,000. If you have $50,000 in your savings or offset account, you only have to pay interest on $550,000. It is beneficial because the amount you need to pay for the home loan is larger than the interest that you have saved on your offset account.

You can split your loan so you can make extra repayments and redraws. SVR is therefore useful for most common mortgage situations.

Gavin from Quantum Finance Australia explaining how standard variable home loans work

Is This Loan the Right Fit for You?

A standard variable rate loan is the best option for you if the loan’s features will be useful for you. It also helps to understand that the interest rate can change at anytime. Therefore, you must be able to afford the repayments should the interest rate increase.

This type of loan is also an excellent choice for you if you plan to refinance your home loan. If you are open to changing to another loan product, the standard variable rate home loan may be the right one for you.

SVRs are also great for investors if they plan to purchase a house before selling the property. It is a great solution while you wait for the sale of your existing property.

Other benefits include:

  • Virtually every lender offers this type of loan, so you will have many lenders from which to choose
  • You can make extra repayments
  • The loans are inherently flexible
  • Many available features
  • If the variable rate lowers, your repayment amount decreases

The Disadvantage of Standard Variable Rate

A standard variable rate home loan may not be suitable for all our customers. If you need more assurance on exactly how much interest you will be paying on your loan, then a fixed rate may be the better choice for you.

SVRs can change in interest rates anytime, depending on the RBA. It is always a good idea to determine the pros and cons of a particular loan type before proceeding with the application.

The disadvantages of this type of loan include:

  • Interest rates are usually a little higher than basic variable rate loans because of the features included
  • The variable rate can increase, therefore raising your repayment amount

The Bottom Line

If you want to borrow a small amount, we suggest that you look at basic variable rates first. It may be a better option for you, especially if you do not need extra loan features.

However, if you want an easy-to-understand home loan with additional features, a standard variable rate loan may be what you are looking for.

If you cannot decide which loan to choose, contact Quantum Finance today, and we will help you choose the best option for you.

Cottesloe Beach in Western Australia from an areal view

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