RBA rate cut on the cards for 2019 as BOQ, Virgin Money hike home loan rates

Kelly Emmerton

11 Jan 2019

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Bank of Queensland and Virgin Money have both announced home loan rate rises this week, a move that may signal a new round of out of cycle home loan rate rises. Mozo Data Manager Peter Marshall said rising rates could lead to an RBA rate cut - or two - in the first half of the year.

Bank of Queensland has announced hikes to its home loan rate of between 0.11% and 0.18%, making it the first lender to raise interest rates in 2019. The interest rate on BOQ’s Economy Owner Occupier Principal and Interest loan is set to increase by 0.11%, while other loan rates in the lender’s lineup will be rising by 0.18% and the Clear Path Owner Occupier Principal and Interest rate will remain the same.

Virgin Money announced a 0.20% rate rise for all existing customers, while owner occupier, principal and interest rates for new borrowers rose 0.05% for borrowers with a loan-to-value ratio below 80%, and 0.20% for loan-to-value ratios above 90%.

The rate changes for both lenders come into effect today, 11 January 2019.

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Over the last 6 months, just more than half the lenders in the Mozo database - 45 out of 87, to be exact - made a majority of hikes to owner occupier, principal and interest loans. These latest rate rises from Bank of Queensland and Virgin Money could signal another round of home loan rate rises from lenders this year.

“In the last round of out-of-cycle rate rises we saw, Bank of Queensland was one of the first to announce increases to its lineup. So, if history is repeating, other lenders are likely to follow suit,” Mozo Data Manager Peter Marshall said.

Lenders have overwhelmingly blamed past rate rises on increased funding pressure, a sentiment BOQ’s Lyn McGrath echoed this week.

“Continuing funding cost pressures and intense competition for term deposits have contributed to this decision,” she said.

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Marshall said that if another round of increases starts, it may prompt the RBA to lower the official cash rate sooner than expected.

“Household debt is high, wages are stagnant and people are really starting to tighten their belts. If lenders keep raising rates, the RBA may look to counter rate rises resulting from funding pressures with a rate cut of its own,” he said.

Most analysts don’t expect to see movement from the Reserve Bank before 2020, but Marshall said it wouldn’t be a major shock if change came earlier, or even if we saw two RBA rate cuts this year.

“I wouldn’t be surprised if the RBA cut rates in the first half of the year. This would mean the banks could hold on to some of the cash rate cuts to make up for increased funding costs, which should mean less pain for borrowers,” he said.

“But I can’t see lenders rushing to slash rates any time soon, and if they do pass on the cut, it won’t be by much. So if the RBA wants to provide relief for borrowers as well, a second cut could be on the cards.”

Even without rate cuts from the banks, there’s hope for home buying hopefuls who know where to look, with rates as low as 3.44%* available, according to Mozo’s database. Head over to our home loan comparison tool to start your search for a low rate loan.

*Reduce Home Loans Rate Lovers Variable Home Loan, 80% LVR for a $300,000 loan has a 3.44% interest rate (3.51% comparison rate) at the time of writing

Hot home loans 2019 - rates updated daily

  • Promoted

    loans.com.au

    3.28% p.a. variable

    3.30% p.a.

    $1234

    Product details Close details
    Smart Home Loan

    A low-rate home loan that could save you thousands. No application or ongoing fees. Unlimited additional repayments. Unlimited free redraws with no minimum redraw amount.

    • 3.28% p.a. variable

    • 3.30% p.a.

    • $520

    • $0.00

    • $0.00

    • yes - free

    • yes - free

    • no

    • 80.00%

    • $50,000

    • $1,000,000

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the Smart Home Loan

  • Promoted

    UBank

    2.99% p.a.
    fixed 1 year

    4.09% p.a.

    $1234

    Product details Close details
    UHomeLoan

    1 year fixed rates are for new Owner Occupier Principal & Interest loans. Fast, easy apply & no ongoing fees. Choose between weekly, fortnightly or monthly repayments.

    • n/a

    • n/a

    • $395

    • $0.00

    • $0.00

    • yes - free up to $20,000 p.a.

    • no

    • no

    • 80.00%

    • $100,000

    • $2,000,000

    • Fixed

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the UHomeLoan

  • Promoted

    Bank of Queensland

    3.39% p.a.
    fixed 3 years

    4.41% p.a.

    $1234

    Product details Close details
    Discount Fixed Rate

    $1000 cashback for first home buyers. Apply by 30 June 2019. No minimum loan amount. Free additional repayments up to $5,000 per year.

    • 3.39% p.a.
      fixed 3 years

    • 4.41% p.a.

    • $450

    • $10.00 monthly

    • $320.00

    • yes - free up to $5,000 p.a

    • no

    • no

    • 80.00%

    • $150,000

    • -

    • Fixed

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

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  • Promoted

    HSBC

    3.47% p.a. variable

    3.48% p.a.

    $1234

    Product details Close details
    Discounted Home Value Loan

    Enjoy unlimited free extra repayments and no ongoing service fees when you apply by 31 July (t&cs apply). Get help with the application process with an HSBC relationship manager. Winner of a Mozo Experts Choice Award 2019 in the Low Cost Home Loan category.^

    • 3.47% p.a. variable

    • 3.48% p.a.

    • $150

    • $0.00

    • $300.00

    • yes - free

    • yes - free online

    • no

    • 90.00%

    • $50,000

    • $7,500,000

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the Discounted Home Value Loan

*WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

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