Do you know which variable rate loan suits first buyers?

A variable rate loan moves with the market

A variable rate home loan means the interest rate charged on your loan can move up or down depending on market conditions and lender decisions. Your repayment amount changes each time your rate shifts. Unlike a fixed rate, you pay what the lender charges at any given time, which means your monthly cost can look different month to month.

For first home buyers in Perth, variable rates offer flexibility that fixed loans typically do not. You can make extra repayments without penalty, redraw money if the lender allows, and often link an offset account to reduce the interest you pay. If rates drop, you benefit immediately without needing to refinance or wait for a fixed term to end.

What offset accounts do and why they matter

An offset account is a transaction account linked to your home loan. The balance in the offset account reduces the loan balance used to calculate interest. If you have a $400,000 loan and $15,000 sitting in a 100% offset account, you only pay interest on $385,000.

Consider a buyer who settles on a property in Canning Vale and keeps their savings in a 100% offset account rather than in a separate savings account. If they maintain a balance of $20,000 in the offset, the reduction in interest charged each month is applied automatically without needing to make extra repayments. The buyer retains access to that $20,000, meaning they can pull it out if something unexpected comes up. That combination of interest savings and liquidity is why offset accounts are worth prioritising when comparing home loans for your first purchase.

Not all variable rate loans include an offset account, and not all offsets are 100%. Some lenders offer partial offset accounts that only reduce your interest calculation by a portion of the account balance. Check the percentage before assuming full offset applies.

Low deposit options under the 5% Deposit Scheme

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a 5% deposit without paying lenders mortgage insurance. In Perth and applicable metropolitan postcodes, the property price cap is $850,000. Outside the Perth metro area, the cap drops to $600,000. Which cap applies depends on the property's postcode classification under Housing Australia's search tool.

A buyer looking at a property in Baldivis near the southern metro edge would need to confirm whether that postcode falls under the $850,000 or $600,000 cap. The distinction is postcode-specific and can shift depending on where the boundary sits. Buyers should verify the applicable cap with their participating lender before making an offer, since both the purchase price and the lender's assessed value must sit at or below that figure.

The scheme does not cap your income, and there is no annual limit on the number of places available. You apply through a participating lender, not directly through Housing Australia. Most lenders on the panel offer variable rate loans under the scheme, and many also allow offset accounts and unlimited extra repayments. Loan features depend on the individual lender's product, so confirming what is included matters more than assuming the scheme itself dictates those terms.

You can read more about first home buyer eligibility and what the process looks like when structuring your application.

Redraw versus offset

Redraw and offset both let you access money, but they work differently. Redraw means you make extra repayments into the loan itself, then apply to withdraw those extra funds if you need them later. The lender may charge a fee, limit how often you can redraw, or take several days to process the request.

Offset keeps your money in a separate transaction account that you control. You can move funds in and out without asking the lender. The interest saving is calculated daily based on whatever balance sits in the account, and there is no approval step if you want to spend that money.

For buyers who want full control and immediate access, offset accounts are the clearer option. Redraw works if you are comfortable locking extra repayments into the loan and do not expect to need that cash on short notice. Some lenders offer both features on the same loan. Others offer one or neither. The product disclosure statement will list what is available, but it is worth asking upfront during the home loan application process rather than discovering limits after settlement.

Western Australian grants and stamp duty concessions

First home buyers in Western Australia purchasing or building a new home may be eligible for a $10,000 grant if the property value sits under the applicable cap. For homes south of the 26th parallel, which covers all of Perth, the cap is $800,000. North of that line, the cap is $1,000,000. The grant does not apply to established homes.

Stamp duty concessions under the First Home Owner Rate apply statewide with a single threshold regardless of location. No duty is payable on homes valued up to $600,000. A concessional rate applies between $600,001 and $800,000. If you are buying vacant land to build on, no duty applies up to $450,000, with a concessional rate between $450,001 and $550,000.

These concessions can be used alongside the 5% Deposit Scheme and a variable rate loan structure. The stamp duty saving reduces the upfront cash you need at settlement, which means more of your savings can go toward the deposit or be held in an offset account once the loan is active. You can explore how borrowing capacity and upfront costs work together when planning your purchase budget.

What changes when rates move

When the Reserve Bank shifts the cash rate or your lender changes their variable rate independently, your repayment amount adjusts. If rates rise, you pay more each month unless you have been making extra repayments or holding a buffer in your offset account. If rates fall, your repayment drops and you keep more cash each month without needing to take any action.

In our experience, buyers who structure their budget around a slightly higher repayment than the minimum required create breathing room when rates move up. If your repayment at the current rate is $2,400 per month and you budget for $2,600, that extra $200 either goes into the loan as an extra repayment or sits in your offset account reducing interest. When rates rise, the increase is absorbed by the buffer rather than forcing you to find more income.

Variable loans do not lock you into a rate, which means you are exposed to increases, but you also gain access to features that reduce interest or let you pay the loan down faster. The tradeoff is flexibility for certainty, and which one matters more depends on how much cash flow buffer you can hold and whether you expect your income to grow over the next few years.

Comparing loan features across lenders

Not every variable rate loan offers the same features. Some lenders include offset accounts at no extra cost. Others charge an annual package fee to access offset and redraw. Some allow unlimited extra repayments with full redraw available. Others cap redraw or charge for each withdrawal.

When comparing lenders, look at the interest rate, the ongoing fees, and what features are included in the standard product. A loan with a slightly higher rate but a full offset account and no monthly fee may cost you less over time than a loan with a lower rate but no offset and a $15 monthly account keeping fee.

Lenders also differ in how quickly they pass on rate cuts and how much of a rate rise they apply when the market shifts. Some lenders move faster than others, and some apply larger increases but smaller decreases. That behaviour is hard to predict in advance, but reviewing how a lender has moved rates over the past few years gives you a sense of their pattern. We regularly see buyers focus only on the rate at application and miss the features and fee structure that shape the actual cost once the loan is active.

When a variable rate fits your situation

A variable rate loan works well if you want the ability to make extra repayments, expect your income to increase over the next few years, or plan to keep a reasonable offset balance that reduces your interest without locking funds into the loan. It also suits buyers who are comfortable with repayment amounts shifting and who have built a buffer into their budget to handle rate rises.

If you prefer knowing exactly what you will pay each month for a set period, a fixed rate or split loan structure may be more appropriate. You can read more about your options and how to structure your loan at the refinancing page, which covers loan features and timing even though it is written for people switching lenders.

Call one of our team or book an appointment at a time that works for you. We will walk through your income, deposit, and what you are looking at in Perth, then show you which lenders and loan features line up with how you actually plan to use the loan.

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