07 Jul 2021

What are the Four Factors That Influence Interest Rates?

How to Get a Good Home Loan Rate When You Have Bad Credit

Your home loan interest rate reflects the interest rates set by the Reserve Bank of Australia. However, four distinct factors determine your interest rates on your mortgage.


Loan Purpose

Whether you are buying a home to live in, also known as an owner-occupied property, or are purchasing an investment property, affects your home loan interest rate. Investment loans usually have higher interest rates than owner-occupied home loans. 


Interest Rate Type

Fixed rates and variable rates affect your home loan’s interest rate. Fixed-rate loans have a locked-in interest rate for a set period. Variable-rate loans have interest rates that change over time. 


Loan Repayment Type

Interest-only loans vs. principal and interest loans can affect your interest rate. The most common option is principal and interest, where you will pay the interest and part of the principal every month. Interest-only repayments are popular when borrowers get into challenging financial situations. With interest-only repayments, you only pay the monthly interest for a set time. This option has lower repayments initially, but when the interest-only period ends, your repayments increase. In addition, you may end up paying more interest by the end of your loan term.


Principal Loan Amount

The amount of money you borrow affects your interest rate. The more money you borrow, the more interest you will have to pay. 


If you are applying for a home loan, contact the brokers at Mortgage House. We can help you find a home loan with competitive interest rates and features that allow you to reduce the amount of interest you pay during the length of your loan. 

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