What is a Standard Variable Interest Rate?
The Reserve Bank of Australia meets monthly. At this meeting, they establish the target cash rate. The cash rate impacts interest rates. Sometimes there’s a need to encourage savings. Other times, the government encourages banks to lend by decreasing interest rates. When you borrow funds from a lender, you’re going to pay an interest rate on top of the principal amount. One rate you can incur is the standard variable interest rate.
Some lenders offer new clients a promotional interest rate. When the promotion expires, clients are moved to the standard variable interest rate as a promotion. The promotional interest rate is discounted; the standard rate will be higher. If you remain in contact with your loan specialist, you may work out a deal to capture the discounted rate again.
A standard variable interest rate is also their benchmark rate. It determines the bank’s variable rates. To capture a wider market, lenders evolved their loan products. This also translates into a higher risk for the lender. Risk is offset by offering competitive higher interest rates to clients with blemishes on their credit reports. To capture well-qualified clients, lenders discount their rates for a period of time.
Keep in mind that rates are almost always negotiable. Clients who maintain a positive repayment history prove their value, which leads to favourable rates through refinancing and other tools.
Standard Variable Interest Rate Conclusion
The 5-year fixed-rate mortgage still exists. However, the lending market evolved, and so have its product offerings. In addition to fixed-rate home loan rates, there’s the variable and standard variable interest rate. Before you agree to the loan terms offered by our loan specialists, they ensure that you understand the components of your Mortgage House loan.