One of Australia’s biggest banks has just delivered a surprise gift to home seekers struggling to secure a home of their own.
NAB has cut its three-year fixed rate on home loans by 0.6 per cent to 5.99 per cent.
The rate cut makes NAB the first of Australia’s “big four” banks to offer prospective buyers a loan product with a “five” in front of it, with the exception of Commonwealth Bank’s Unloan offerings.
It also marks the first fixed rate change by a major bank this year, according to RateCity.
“This is a strategic move by NAB in an attempt to test whether there is any appetite among borrowers to return to rate fixing,” said RateCity research director Sally Tindall.
‘A fixed rate from a big bank that starts with ‘five’ is likely to raise at least a few eyebrows, particularly among those worried about the prospect of further rises in cash rates.
‘The popularity of fixed rates peaked in July 2021, when 46 per cent of new and refinanced loans opted for a fixed rate, according to the ABS.
‘In the most recent data, this figure now stands at just 1.7 percent.
NAB has cut its three-year fixed rate for home loans by 0.6 percent to 5.99 percent
‘It’s hard to see people returning to fixed rates, but this sub-6 per cent rate from the NAB is designed to test that.
‘However, setting a three-year time frame is a big financial commitment at any time, but particularly when the future of the cash exchange rate remains highly uncertain.’
The cut applies only to the three-year product and only to owner-occupant borrowers paying principal and interest.
Borrowers must own at least 30 percent of their property so that the loan-to-value ratio is 70 percent or less.
NAB’s rivals Commonwealth Bank, Westpac and ANZ offer three-year fixed rates of 6.59 per cent.
For five-year products, CBA and Westpac offer loans at 6.69 per cent, while NAB offers 6.79 per cent and ANZ 6.84 per cent.
Ms Tindall said a fixed rate could offer borrowers some relief from having to follow every thought and expression of the Reserve Bank of Australia.
The RBA sets the cash rate, which serves as a benchmark for interest rates throughout the economy.
“RBA Governor Michele Bullock has said the cash rate is in ‘tight territory’, meaning it is likely to come down at some point, however not even the RBA knows exactly when that will be, by how much and whether we are likely to see further increases before then,” Tindall said.
‘For those looking for some relief from having to follow every RBA idea, 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 lowest amount of interest possible, it could end up being a toss-up between a highly competitive variable rate and a short-term fixed rate.’
‘RateCity.com.au’s database shows the lowest one-year fixed rate is at 5.74 per cent, while the lowest variable rate is just 0.01 percentage point higher at 5.75 per cent.
‘There is barely a hair’s breadth between the two rates, but a couple of changes in the cash rate in either direction would change this equation completely.
‘Borrowers considering a fixed rate should be aware that these loans are much less flexible, with limits on additional payments and usually 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 it at the end of the fixed rate period.
‘The last thing you want to do is move to a highly uncompetitive variable rate once the fixed rate term expires.’