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With a variable rate (also known as a floating rate), the interest you pay on your home loan can go up or down.
If interest rates fall, you’ll pay less in interest. You'll also pay down your home loan faster, as we keep your repayments the same. If you want to reduce your repayments, you can request this.
On the other hand, if interest rates rise your repayments may increase, so you need to have the room in your budget to cope with higher payments if rates rise.
With a variable rate you also have flexibility to increase your payments whenever you like, or to make lump sum payments. This can be handy if you come into some money, like a work bonus, a pay rise, or an inheritance.
You don’t have to go all in on a variable mortgage. You could put part of your mortgage on a floating rate – giving you the flexibility to make extra or higher payments if you’d like – and part of your mortgage on a fixed rate – giving you certainty about how much you’ll be paying on that amount for a set time.