Understanding Interest Rates: What Every NSW Buyer Needs to Know

Posted on 05 Feb 2026

Interest rates influence two critical things when it comes to property in New South Wales:

How much you can borrow
What your repayments will be

Get these wrong, and the loan can feel stressful fast. Get them right, and your mortgage becomes a tool — not a burden.

Here’s how to think about it clearly and confidently.

The Two Main Types of Interest Rates

Variable Interest Rates

Variable rates move with the market.

Pros

Flexibility to make extra repayments
Access to offset accounts
Easier refinancing

Cons

Repayments can rise or fall over time

Variable loans suit buyers who want flexibility and can handle some movement in repayments.

Fixed Interest Rates

Fixed rates lock in your interest rate for a set period.

Pros

Repayment certainty
Easier budgeting

Cons

Limited extra repayments
Offset accounts may be restricted or unavailable
Break costs can apply if you exit early

Fixed loans suit buyers who value stability and predictable cash flow.

Don’t Just Look at the Headline Rate

The comparison rate matters more than the advertised rate.

It includes:

Interest rate
Most fees and charges

This gives a clearer picture of the true cost of the loan, not just the marketing number.

Principal & Interest vs Interest Only

Principal and Interest

Reduces your debt from day one
Builds equity faster
Generally favoured by lenders

Interest Only

Lower repayments short term
Loan balance doesn’t reduce
You still owe the full amount later

Interest-only loans can work strategically, but they’re not a long-term solution for most owner-occupiers.

Why Offset Accounts Are So Powerful

An offset account reduces the interest charged on your loan balance.

Every dollar sitting in offset:

Lowers daily interest
Shortens the loan term
Saves thousands over time

It’s one of the simplest ways to improve loan efficiency without locking money away.

Redraw: Your Built-In Safety Net

Redraw allows you to access extra repayments you’ve already made.

It’s useful for:

Emergency buffers
Short-term cash flow needs
Flexibility without new lending

Stress Test Your Budget

Always assume rates may rise.

If your loan still works when rates tick higher, you’re borrowing within your comfort zone — not just your maximum.

Repayment Frequency Matters

Weekly or fortnightly repayments can reduce interest over time by keeping the loan balance lower more often.

It’s a small change that adds up.

The Quick Takeaway

Choose a loan structure that fits your cash flow
Build a buffer
Review your loan every year

The “best” loan isn’t universal it’s personal.

If you’d like to talk through your options and structure a loan that actually supports your goals, I’m happy to help. A quick conversation now can save years of stress later.

Disclaimer:
The information provided is general in nature and for educational purposes only. We are property agents, not licensed financial advisers. This content should not be considered financial advice. You should seek independent financial or lending advice tailored to your personal circumstances before making any decisions.