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Virgin Money increases interest rates

Virgin Money increases interest rates

Annie Kane Comments 2
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The lender has announced that, from 5 April, it will increase the interest rate on three-year fixed rates for investors and variable rates for new owner occupiers with LVRs over 90 per cent.

Virgin Money has said that the following changes will be made to its Reward Me Home Loan from Wednesday, 5 April:

  • increase the three-year fixed Reward Me Home Loan for investors by 0.15 per cent, bringing the new interest rate to 4.14 per cent per annum (p.a)
  • increase the variable rates for owner occupiers with LVRs over 90 per cent p.a. (for new applications only) by 15 basis points.

The latter change will bring the new interest rate to 4.49 per cent p.a for borrowings between $75,000 and $499,999; 4.44 per cent for borrowings between $500,000 and $749,999; and 4.39 per cent for borrowings over $750,000.

The changes follow on from a range of rate hikes in recent weeks, and a crackdown on investor lending from APRA.

The latest measures build on those communicated to authorised deposit-taking institutions (ADIs) in December 2014, aimed at improving the quality of new mortgage lending generally and moderating the growth of investor lending in particular. 

According to the regulator, this increased scrutiny has been in response to “an environment of heightened risks, reflected in an environment of high housing prices, high and rising household indebtedness, subdued household income growth, historically low interest rates, and strong competitive pressures”.



APRA has therefore written to ADIs advising that it expects the banks to:

  • limit the flow of new interest-only lending to 30 per cent of total new residential mortgage lending, and within that:
    • place strict internal limits on the volume of interest-only lending at loan-to-value ratios (LVRs) above 80 per cent; and
    • ensure there is strong scrutiny and justification of any instances of interest-only lending at an LVR above 90 per cent;
  • manage lending to investors in such a manner so as to comfortably remain below the previously advised benchmark of 10 per cent growth;
  • review and ensure that serviceability metrics, including interest rate and net income buffers, are set at appropriate levels for current conditions; and
  • continue to restrain lending growth in higher risk segments of the portfolio (e.g. high loan-to-income loans, high LVR loans, and loans for very long terms).

 

[Related: Banks move on interest rates out of cycle]

Virgin Money increases interest rates
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Annie Kane

Annie Kane

Annie Kane is the editor of The Adviser magazine, Australia’s leading magazine for mortgage brokers. As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also the host of the Elite Broker podcast and regulator contributor to the Mortgage Business Uncut podcast. 

Before joining The Adviser team at Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.

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