BOQ and Virgin Money cut home loan rates to record lows

author-avatar By on May 20,2020
BOQ and Virgin Money cut home loan rates to record lows

Photo by City of Gold Coast on Unsplash

Bank of Queensland has slashed home loan interest rates in an aggressive attempt to expand its mortgage book.

Bank of Queensland (BOQ) cut the rate on its Economy Variable home loan to 2.69% p.a. on Wednesday (2.86% p.a. comparison rate*).

The rate is available to new borrowers only, with a maximum LVR (loan to value ratio) of 70%, and is a discount of 63 basis points on BOQ's regular variable rate. 

BOQ's subsidiary, Virgin Money, also reduced rates on its variable rate home loan by 20 basis points to 2.60% p.a. (2.77% p.a. comparison rate), the lowest mortgage rate ever offered by a BOQ entity. 

The rate is only available to new customers borrowing more than $500,000 who have a minimum deposit of 40%. 

Both mortgages come with redraw facilities and allow unlimited additional repayments. 

To further lure new customers in, Virgin Money has offered $2,500 cashback when refinancing, up from $500 previously. 

BOQ was reached out to for comment regarding the cuts. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Provider
Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayment
 

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 01 June 2020. View disclaimer.

The cuts are clearly aimed at expanding BOQ's mortgage book, which according to the Australian Prudential Regulation Authority (APRA), contracted by $1.35 billion to $28.7 billion in the last four years.

In contrast, during the same period Macquarie and ING expanded their loan books by $20 billion and $13 billion respectively. 

BOQ last made cuts to variable home loan rates in early April in response to the Reserve Bank of Australia's (RBA) first March cash rate cut, announcing it would cut owner-occupier rates by 17 basis points and investor rates by 25 points. 

BOQ and Virgin Money's cuts come shortly after Macquarie made a wide range of cuts last week to both owner-occupier and investment loans.

Macquarie made a 5 basis point cut to its Basic Variable Owner Occupied P&I 60 rate, taking it 2.64% p.a. (2.64% p.a. comparison rate*). 

For investors, Macquarie cut its Basic Variable Investment P&I 60 by 10 basis points to 2.89% p.a. (2.89% p.a. comparison rate*).

Variable rate cuts have been few and far between since the flurry of activity following the RBA's emergency second cash rate cut in March. 

With the central bank announcing the cash rate was at its effective floor at 0.25% and lenders' margins squeezed historically tight due to the COVID-19 induced recession, there is little room for movement on interest rates. 

Instead, lenders have been making numerous cuts to fixed rates, with many of these rates far more competitive than their variable cousins. 

One of the lowest on the market is ING's Orange Advantage Residential 2-year fixed loan which was cut to 2.09% p.a in March (3.77% p,a comparison rate*).


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au and loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
Alex joined Savings.com.au in 2019. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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