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Variable Rate Mortgages Explained

Lenders will advertise their interest rates at slightly varied rates. These rates are based around the Official Cash Rate (OCR) which is “set” by the Reserve Bank. These maybe raised or lowered at any time. This in turn will result in individual lenders either raising or lowering their “variable interest rates”. Other factors besides a change in the ORC rate may include competition by other lenders and the cost the lender has to meet when lending funds themselves.


  • It allows more flexibility without penalties with regards to lump sum payments or early settlement.

  • As and when the rates decrease so do the repayments on the mortgage.

  • It is far easier to consolidate other debt into the existing mortgage.


  • Variable rates may increase and a fixed rate option in hindsight could have been a better option as they would have been a lot lower.

  • If rates go up, repayments go up which places pressure on budgeting.

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