RateCity has identified three types of savers that have a variable home loan. They are:
- the prudent saver
- the feeble saver
- the partial saver
A feeble saver is someone who only pays their minimum requirement off their home loan each month, according to RateCity. So when interest rates fall, the feeble saver keeps the extra money they were paying and spends it rather than makes higher repayments on their loan.
The feeble saver is not the best strategy when it comes to paying off your variable rate home loan because once interest rates rise, they will be most financially impacted by being forced to make higher repayments each month. If the feeble saver adapted the strategy of the prudent saver or partial saver, they would be much better off because they would be paying extra on their mortgage repayments and therefore reducing their loan size and saving on interest.
Use Australia’s leading home loan comparison service to compare variable rates. Also try our free Australian home loan calculator to see how much you will need to repay for different loan and term amounts.