Virgin Money breaks with rivals by cutting interest-only mortgage rates

Posted: 19 September 2017 9:14 am
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Virgin Money has cut interest-only rates as other lenders hike rates on the products.

Effective from today, the lender has trimmed fixed interest-only home loan rates for both owner-occupiers and investors. Virgin Money has cut the rates by 10-30 basis points.

Old rateNew rateReduction
1 year fixed4.39%4.39%None
2 year fixed4.39%4.19%0.20%
3 year fixed4.49%4.39%0.10%
4 year fixed4.69%4.39%0.30%
5 year fixed4.79%4.49%0.30%
Old rateNew rateReduction
1 year fixed4.49%4.49%None
2 year fixed4.49%4.39%0.10%
3 year fixed4.49%4.39%0.10%
4 year fixed4.89%4.59%0.30%
5 year fixed4.99%4.69%0.30%

The cut comes amid interest-only rate hikes from other lenders. In April of this year, ANZ hit borrowers with a hike to interest-only rates while cutting rates for principal and interest borrowers. June and July saw NAB, Westpac and Commonwealth Bank all follow suit.

Virgin's rate cuts put their owner-occupier products under the Australian average for home loan rates for September 2017. The current average interest rates for fixed-rate products across the market this month are as follows:

  • 1 year fixed: 4.43%
  • 2 year fixed: 4.38%
  • 3 year fixed: 4.46%
  • 5 year fixed: 4.88%

Lenders have been raising rates on the loans to deter borrowers as they try to work toward a cap on interest-only lending instituted by the Australian Prudential Regulation Authority (APRA). APRA told banks earlier this year that new interest-only lending should be capped at 30% of all new lending and handed the banks a September deadline.

Recent CoreLogic research suggested that interest-only lending was dropping sharply, but that lenders had work to do to get below the 30% cap.

If you want to look in a competitive fixed rate before the next rate rise, check out our range of fixed-rate loans. If you're looking to refinance to a better loan, we have plenty of refinancing options too.

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