Big 4 bank cuts fixed rates by up to 40 bps

The changes affect products for both owner-occupiers and investors making principal and interest repayments.

The bank has joined ANZ and Commonwealth Bank in offering new fixed rate home loans for owner-occupiers at a rate below 3 per cent.

A summary of the interest rate changes are as follows:

Owner-occupied (principal and interest repayments):

• 1-year fixed rate has been cut by 30bps to 3.29 per cent
• 2-year fixed rate has been cut by 21bps to 3.08 per cent
• 3-year fixed rate has been cut by 31bps to 3.08 per cent
• 4 and 5-year fixed rates have been cut by 40bps to 3.29 per cent

Package owner-occupied (principal and interest repayments):

• 1-year fixed rate has been cut by 30bps to 3.19 per cent
• 2-year fixed rate has been cut by 21bps to 2.98 per cent
• 3-year fixed rate has been cut by 31bps to 2.98 per cent
• 4 and 5-year fixed rates have been cut by 40bps to 3.19 per cent

Investment (principal and interest repayments):

• 1-year fixed rate has been cut by 20bps to 3.69 per cent
• 2 and 3-year fixed rate has been cut by 31bps to 3.38 per cent
• 4 and 5-year fixed rates have been cut by 30bps to 3.69 per cent

Package investment (principal and interest repayments):

• 1-year fixed rate has been cut by 20bps to 3.59 per cent
• 2 and 3-year fixed rate has been cut by 31bps to 3.28 per cent
• 4 and 5-year fixed rates have been cut by 30bps to 3.59 per cent

Commenting on the changes, Canstar finance expert Steve Mickenbecker said: “NAB joins ANZ and Commonwealth Bank with a rate below 3 per cent, demonstrating the appetite of the big banks for quality new business.

“Fixed rates are an attractive vehicle for the banks to grow their market as the lower rate isn’t passed on to existing customers. It means the banks can offer a competitive rate without hurting their overall margin too much.

“Variable rates may fall further yet but this doesn’t guarantee that fixed rates will also fall as they are only tenuously tied to the Reserve Bank cash rate. Meanwhile borrowers can set their repayments at a favourable rate.

“Timing of the fix is also sensitive to the interest rate cycle, as borrowers could find themselves locked when rates start to move up and miss the next opportunity to fix.”

Variable rate changes

The announcement comes after NAB also announced cuts to its variable home loan rates of 15 and 30bps effective as of 11 October 2019.

NAB will apply a 15bps reduction to all of its owner-occupied and investor home loans, with the exception of investor IO products, which will be cut by 30bps.

The major bank’s SVR for owner-occupiers will start from 4.77 per cent, while its SVR for investors will start from 5.37 per cent.

NAB’s chief customer officer of consumer banking, Mike Baird, commented: “While these changes further support our 930,000 home loan customers, we are aware of the growing impact reductions in interest rates have on our 3 million savings and investment customers and will continue to offer competitive interest rates on savings and term deposits.”

He added: “With the RBA cash rate at historic lows, the cost of deposits comes under pressure.

“This dynamic is unlikely to change for the foreseeable future, but we’re determined to support all our customers and play our part by continuing to lend to boost growth and confidence in the economy.”

[Related: Mortgage rates drop in response to RBA move]