In Australia, the majority of home loan borrowers have variable interest rates rather than fixed rates. Variable interest rates can rise or fall at any time, but they generally move in lockstep with Australia's cash rate, which is set by the Reserve Bank of Australia (RBA). For example, if the cash rate is reduced, your lender is likely to reduce the interest rates on its variable home loans, which could include the interest rate you're paying. Variable rates, on the other hand, can be both a blessing and a curse if a lender decides to raise rates.

If you believe interest rates will fall, variable-rate loans may be preferable to fixed-rate loans. However, if lenders anticipate a future cash rate cut, they may offer some enticingly low fixed rates to entice more people to lock in their home loan rate. If you choose a fixed-rate mortgage, you will miss out on any rate reductions that occur during the fixed-term. Keep in mind that lenders typically have a good idea of which way interest rates are trending and price their home loans accordingly.

Variable loans are also more flexible than fixed-rate mortgages, with many offering appealing features such as offset accounts, redraw capabilities, and the ability to make additional repayments. These features can help you save money on interest and pay off your loan faster.

When you are reading this, check out our page on current interest rates to see what the RBA cash rate is, as this can give you a good idea of whether rates are likely to be increased or decreased anytime soon.