NAB overhauls advertised rates on its discounted variable mortgage

NAB, Australia’s third largest lender, has dropped the advertised rates on its discounted variable home loan, in a strategic move by the bank on how it markets its prices.

RBA data shows new customers applying for a variable rate with a big four bank are currently being offered an interest rate, on average, of 6.28 per cent. Yet, every single one of the big banks’ advertised variable rates are higher than this average.

This is because big four banks purposely advertise higher rates on their package loans (that is, loans that come with an offset account) than what customers end up getting.

This marketing strategy allows them to offer customers sizeable, personalised discounts off artificially high advertised rates.

Australia’s biggest bank, CBA, overhauled its advertised rates in November 2022 to bring its discounted variable rate more in line with what customers were actually receiving. Today, NAB has done the same, and while both banks’ lowest advertised rates are still higher than the RBA average, Westpac and ANZ’s variable with offset rates are considerably higher.

Changes to NAB Tailored Home Loan - lowest rates

Source: RateCity.com.au. Note: the above rates require customers to have 40 per cent deposit or more and be paying principal and interest. The option to have an offset account comes with a $8 monthly fee.

Big four banks’ lowest advertised variable rates

Source: RateCity.com.au

RateCity.com.au research director, Sally Tindall, said: “Potential new borrowers should not get too excited about NAB’s changes today, this should not be considered a whopping great rate cut, but rather a strategic move by the bank to better reflect the actual rate customers end up receiving.”

“This change from NAB takes us one step closer to removing the cloak of secrecy around the interest rates big four bank customers actually receive,” she said.

“While advertising high rates might seem like an odd strategy, it’s a marketing tool the big banks have been employing for years.

“There aren’t many industries where the market-leaders purposely advertise prices that are higher than what the customer actually pays, but the mortgage industry is one of them. They do this so that customers walk away feeling like they have won lotto by being offered a special discount.

“However, a borrower looking for a competitive deal should focus on the rate they’re paying – not the discount being offered.

“In November 2022, CBA realigned its discounted variable pricing to better reflect what customers were receiving. Now NAB has followed suit almost 17 months later.

“This move by NAB puts pressure on Westpac and ANZ to review their advertised rates, particularly in relation to their mortgages with offset accounts. Both banks are currently advertising owner-occupier variable rates that start with a 7, when the reality is most new customers are getting sizeable discounts.

“We know from the RBA the average variable rate for new customers with a big four bank is 6.28 per cent. As an average, this means there’s plenty of borrowers qualifying even lower rates,” she said.

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