NAB Reduces Fixed Home Loan Rates by Up to 0.65 Percentage Points
In a significant move for the Australian mortgage market, NAB, the country’s third largest lender, has announced a reduction in its fixed home loan rates by as much as 0.65 percentage points. This adjustment brings NAB’s lowest 3-year fixed rate down to a competitive 5.89% for owner-occupiers who can provide a deposit of at least 30%, resulting in a loan-to-value ratio (LVR) of 70% or less.
These rates are specifically tailored for owner-occupiers who are paying principal and interest, with a deposit requirement of 30% or more.
Comparison Among Major Banks
With this latest adjustment, NAB’s lowest 3-year fixed rate now aligns with the competitive offerings from Commonwealth Bank of Australia (CBA) and Westpac. In contrast, ANZ remains the only major bank whose lowest 3-year fixed rate still starts with a ‘6’.
Last week, Macquarie Bank also made headlines by slashing a range of fixed rates by up to 0.40 percentage points, bringing their rates down to 5.39%. However, according to the RateCity.com.au database, the lowest 3-year fixed rate available is currently 4.99% from SWS Bank, which is 0.90 percentage points lower than NAB’s offering.
Is Now the Right Time to Fix?
Despite the competitive fixed rates being offered by NAB, CBA, and Westpac, the percentage of borrowers choosing fixed rates remains at near record lows. Recent data from the Australian Bureau of Statistics (ABS) indicates that only 2.0% of new and refinanced loans in August opted for a fixed rate. This trend is largely attributed to borrowers preferring variable rates, anticipating potential cash rate cuts that some economists predict could occur as early as December this year.
NAB’s economic team had previously forecasted the first cash rate cut for May next year but has since revised its prediction to February 2025.
Insights from RateCity
Laine Gordon, money editor at RateCity.com.au, commented on NAB’s recent rate cut: “This move aligns NAB’s lowest 3-year fixed rates with its major bank competitors, CBA and Westpac. At 5.89% for a 3-year term, this offer from NAB is likely to attract attention. However, with the Reserve Bank of Australia (RBA) expected to cut rates soon, the appeal of locking in a fixed rate for an extended period may not be enticing for many.”
Gordon further noted that the popularity of fixed rates peaked in July 2021, when 46% of new and refinanced loans opted for fixed rates, a stark contrast to the current figure of just 2.0%.
The RateCity database shows that while the lowest 3-year fixed rate is now 4.99%, the lowest variable rate is slightly higher at 5.75%.
Gordon cautioned that borrowers considering fixing their home loan should be aware of the limitations of fixed rates, which often come with restrictions on extra repayments and typically do not allow access to offset accounts. Additionally, short-term fixed rates may require renegotiation or refinancing at the end of the fixed period, risking a transition to an uncompetitive variable rate if not managed properly.