Bank of Queensland is raising its variable rates for the second time in six months, citing higher funding costs and the impact of competition. This is despite the fact that funding costs and funding mix were positive for the bank's net interest margin during the February half.BOQ is increasing its variable mortgage rates by 12 basis points for owner-occupiers and by 25 bps for investors, effective from April 15.The standard variable rate will increase to 5.68 per cent for owner-occupiers and 6.28 per cent for investors. The rate on the bank's Clear Path mortgage will increase to 4.72 per cent for owner-occupiers and 5.14 per cent for investors.The bank said in its half-year financial report that asset pricing benefited from the industry-wide re-pricing late last year. However, this was largely eroded by lower front book (discounting for new business) and retention re-pricing, together with elevated funding spreads and hedging costs.Last November BOQ increased variable interest rates by 18 basis points. This re-pricing added six basis points to the net interest margin.However, discounting on new loans cut NIM by two bps and "retention re-pricing" took off another basis point. A change in the business mix, with stronger growth in lower margin loans, took another basis point off the NIM.The bank said it missed out on much of the benefit from reduced funding costs. Changes to funding costs and funding mix actually boosted NIM by two bps but this was well down on the benefit of lower funding costs provided in earlier periods.