NAB cuts fixed rates for the first time in 2024

Australia’s third largest home loan lender, National Australia Bank, has today slashed its 3-year fixed rate by 0.60 percentage points – the first fixed rate change from a big four bank this year.

The bank has cut just the one fixed term and only for owner-occupiers paying principal and interest, in a move designed to appeal to customers worried about the prospect of future cash rate rises.

This takes NAB’s lowest 3-year fixed rate down to a relatively competitive 5.99 per cent for owner-occupiers that own at least 30 per cent of their property (loan-to-value ratio of 70% or less).

NAB: today’s fixed rate change

Rates are for owner-occupiers paying principal & interest

Source: RateCity.com.au

NAB the only big four bank with a rate in the ‘5’s’

Today’s move means NAB is the only big four bank offering an advertised rate that starts with a ‘5’ (excludes CBA’s Unloan).

The next lowest big four bank fixed rate is from Westpac at 6.49 per cent, fixed for 2-years.

That said, the lowest 3-year fixed rate on the RateCity.com.au database is 0.40 percentage points lower at 5.59 per cent from Community First Bank, Police Bank, Bank of Heritage Isle and Border Bank.

Big four banks: lowest advertised rates

Source: RateCity.com.au. Note: rates are for owner-occupiers paying principal and interest. Deposit requirements apply. * rates are for CBA and ANZ’s digital-only home loans.

Lowest fixed rates on the RateCity.com.au database

Source: RateCity.com.au. Note: rates are for owner-occupiers paying principal and interest. Deposit requirements apply, excludes green loans, lowest variable excludes introductory rates. *first home buyer loan. ^ Police Bank rate is also on offer from Bank of Heritage Isle and Border Bank.

Does this mean now is a good time to fix?

Most lenders’ lowest advertised home loan rates are fixed rates and yet despite this, the proportion of borrowers opting for a fixed rate is at near record lows.

The latest ABS lending indicator figures show just 1.7 per cent of new and refinanced loans in May opted for a fixed rate – the fourth lowest level in ABS records.

This is unsurprising, with borrowers opting to stay on variable rates in anticipation of the cash rate cuts some economists previously predicted would come as early as August.

However, with the RBA now potentially mulling over a cash rate hike due to sluggish inflation figures, a short-term fixed rate is no longer the silliest idea, provided borrowers shop around for a competitive rate and commit to refinancing or renegotiating their loan as soon as their fixed rate expires.

NAB’s own economic team previously predicted the first cash rate cut would come in November of this year, but recently changed its forecast, now predicting the first cut won’t arrive until May 2025.

Proportion of new and refinanced loans opting for a fixed rate: ABS

Source: ABS Lending Indicators, original data. Based on the value of new and refinanced loans funded in the month.

RateCity.com.au research director Sally Tindall said: “This is a strategic move from NAB in a bid to test whether there’s any appetite among borrowers to revert back to fixing.”

“A big bank fixed rate that starts with a ‘5’ is likely to turn at least a few heads, particularly among those worried about the prospect of further cash rate hikes,” she said.

“The popularity of fixed rates peaked back in July 2021 when 46 per cent of new and refinanced loans opted for a fixed rate, according to the ABS. This now sits at just 1.7 per cent in the most recent data.

“It’s hard to see people flocking back to fixed rates, but this rate under 6 per cent from NAB is designed to test this.

“However, fixing for three years is a big financial commitment at any time, but particularly when the future of the cash rate remains highly uncertain.

“Governor Bullock has said the cash rate is in ‘restrictive territory’, which means it’s likely to come down at some point, however, not even the RBA knows exactly when that will be, by how much, and whether we’re likely to see more hikes before then.

“For those looking for some relief from having to follow the RBA’s every thought, a fixed rate could be the certainty they need, even if they end up having to pay more for that peace of mind.

“For those looking to pay the least amount of interest possible, it could end up being a gamble between a highly competitive variable rate and a short term fixed one.

“The RateCity.com.au database shows the lowest 1-year fixed rate is sitting at 5.74 per cent, while the lowest variable is just 0.01 percentage point higher at 5.75 per cent.

“Right now, there’s barely a crack of light between the two rates, but a couple of cash rate changes either way would change this equation entirely.

“Borrowers considering a fixed rate should know these loans are a lot less flexible, with caps on extra repayments and typically no access to an offset account.

“Short-term fixed rates can also be a lot more work as you’ll need to renegotiate your loan, or potentially refinance at the end of the fixed rate period.

“The last thing you want to do is roll over onto a highly uncompetitive variable rate after the fixed rate term expires,” she said.

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