An owner-occupier compares variable rate loans offered by the same lender on the same day. Which is usually priced at the lowest interest rate?
Correct Answer
C) A basic variable rate loan with no offset account or package fee.
A basic variable rate loan strips out features such as an offset account, extensive redraw and package benefits, so lenders can price it below their standard variable rate. Among the same lender's variable products, investor loans and interest-only loans are usually priced higher again, because lenders treat them as higher risk. Whether a fixed rate is cheaper than variable depends on the rate cycle, which is why this comparison is limited to variable products.
Why This Is the Correct Answer
A basic variable loan is the lender's no-frills product. With no offset account, package or other extras to fund, it is usually priced below the lender's standard variable rate and below investor or interest-only loans.
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