the adviser logo

Virgin Money hikes variable rates

by Charbel Kadib11 minute read
Virgin Money hikes variable rates

The non-major lender has increased interest rates on its variable home loan rates on variable owner-occupier and interest-only home loans.  

Virgin Money has announced changes to its home loan interest rates, with variable rates for all existing principal and interest (P&I) and interest-only (IO) home loans to increase by 20 basis points, effective Friday, 11 January.

However, the lender noted that the majority of its standard variable rates for new home loan applications will remain unchanged, with only a few set to increase.

Virgin Money’s general manager, lending, cards & deposits, Johnny Lockwood, attributed the decision to the continued rise in wholesale funding costs.


“The decision to increase interest rates is never easy,” he said.

“We have absorbed higher funding costs for the last 12 months in order to delay the impact for our home loan customers.

“Unfortunately, funding costs remain high and are likely to remain elevated into the foreseeable future.”

Virgin Money’s rate hike follows a move from the Bank of Queensland (BOQ) to increase its mortgage rates by up to 18 basis points, with HomeStart Finance also recently announcing an interest rate rise of 15 basis points on its Seniors Equity loan product. 

Throughout 2018,  several lenders, including three of the big four banks, increased rates out-of-cycle, also citing the rise in funding costs.

However, despite hiking its variable mortgage rates, Virgin Money also announced it is reducing fixed rates by between 5 basis points and 10 basis points for the following products:

  • Two and three-year fixed rates for owner-occupier principal and interest loans over $300,000 with an LVR of 90 per cent and under.
  • Two and three-year fixed rates for investment interest-only loans with an LVR of 90 per cent and under.

 Reacting to the news, RateCity.com.au research director Sally Tindall added: “This is purely a business decision for Virgin Money. They’ve decided to ask their existing customers to pay more on their home loan to cover a shortfall they’ve been absorbing over the last 12 months.

“Virgin was a notable exception in the out-of-cycle rate hikes that happened mid last year.”

Ms Tindall said that she expects a wave of out-of-cycle interest rate hikes in the coming months.

“As the cost of funding continues to plague Australian lenders, [Virgin Money’s] move is likely to be the next step towards a landslide of rate hikes,” she said.

In light of the rate hikes, third-party industry leaders have highlighted opportunities for brokers to further “champion” the best interest of borrowers in the current interest rate environment.

Speaking to The Adviser, Loan Market executive director Matt Lawler said that such developments “further highlight the great need for the mortgage broker industry in the financial landscape”.

Mr Lawler said that brokers are “champions for customers”, adding that without the third-party industry, “customers would have very little ability to recognise these changes and then act on them”.

He added: “This is what the broker market is designed to do – to support customers through changes like this.”

Mr Lawler encouraged broker to capitalise on recent rate changes by providing clients with credit alternatives from lenders with more suitable pricing arrangements.

Also speaking to The Adviser, Susan Mitchell, CEO of Mortgage Choice, added: “Looking after the client’s best interest is what brokers do. The start of the year is a perfect time for brokers to touch base with their clients.

“Therefore, I would encourage brokers whose customers may have been affected by recent rate hikes to have conversations with their clients and assess whether they are still in a suitable product for their needs.”

Further, Sydney-based mortgage broker and director of Catalyst Advisors Stephen Michaels told The Adviser that he observed a rise in refinancing volumes off the back of rate hikes in 2018, which he said were also driven by “numerous ad hoc policy changes”.

Mr Michaels encouraged brokers to keep abreast of interest rate and credit policy changes, in what he described as a “fluid” mortgage landscape.

[Related: ‘Fluid’ rate environment ripe for brokers]

virgin money loan

Charbel Kadib


Charbel Kadib is the news editor on The Adviser and Mortgage Business.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Email Charbel on: [email protected]

Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more