A major Australian bank has slashed variable mortgage rates even though borrowers have missed out on relief from the Reserve Bank.
NAB has reduced its base rate for owner occupiers by 40 basis points, taking variable rates down to 6.44 per cent in time for Christmas.
The latest super-sized relief – outside of an RBA rate cut – would see a new borrower with an average, $642,121 mortgage save $170 on monthly mortgage repayments.
It’s also available for borrowers with a small 5 per cent mortgage deposit rather than the usual 20 per cent deposit that’s much harder to save up for.
But it is far from the lowest variable rate from a Big Four bank, with ANZ offering 6.14 per cent and the Commonwealth Bank charging 6.15 per cent interest on their digital-only home loans.
NAB’s latest reduction is a sign of more intense competition from the major banks, even though Reserve Bank of Australia Governor Michele Bullock has hinted at another possible rate rise.
Canstar data insights director Sally Tindall said while the NAB offer was only for new customers, it meant borrowers with the major banks had leeway to negotiate a better deal on their loan.
‘If you’re an existing customer, there’s absolutely nothing stopping you from picking up the phone and asking for a rate cut,’ she said.
A major Australian bank has slashed variable mortgage rates even though borrowers have missed out on relief from the Reserve Bank
The major banks are offering variable rates starting with a ‘six’ but a Canstar analysis showed 38 smaller lenders with variable rates below that level.
‘Before you play hardball, jump online and work out what a competitive rate looks like,’ Ms Tindall said.
Mozo analyst Rachel Wastell said NAB’s latest move was a sign of intensifying competition in the absence of any RBA rate cut.
‘This substantial, out-of-cycle cut could be NAB’s response to intensifying competition between the Big Four banks, two of which are offering low rate digital-only home loan options for borrowers,’ she said.
The Reserve Bank of Australia this month left the cash rate on hold at 4.35 per cent, with borrowers missing out on relief despite the U.S., UK, Canada, European Union and New Zealand already cutting rates this year.
Australia’s Big Four banks are now expecting the RBA to start cutting rates in February, despite Ms Bullock hinting another rate rise was still possible – this month declaring she was ‘not ruling anything in or out’.
But the 30-day interbank lending market doesn’t see relief starting until August, with traders now only expecting one rate cut in 2025.
In October, the market was expecting four rate cuts from the RBA.
Canstar data insights director Sally Tindall said while the NAB offer was only for new customers, it meant borrowers with the major banks had leeway to negotiate a better deal on their loan
Ms Bullock said financial markets had expected global inflation to remain high regardless of whether Republican Donald Trump or Democrat Vice-President Kamala Harris had won this month’s U.S. presidential election.
‘The fact that there’s lots of policies there which will be potentially inflationary – tariffs, much spending – probably didn’t matter who won, there was always going to be a bigger deficit,’ she told a Sydney forum on Thursday.
‘It was just a matter if it would be reduced taxes or more spending that got you there.
‘There is going to be more government debt out there so I think that is part of what’s being reflected in bond markets.’
But Ms Bullock said president-elect Trump’s plans for 60 per cent tariffs on Chinese imports could still affect financial markets and demand for Australian iron ore, the commodity used to make steel.
Reserve Bank Governor Michelle Bullock said financial markets had expected global inflation to remain high regardless of whether or not Republican Donald Trump or Democrat Vice-President Kamala Harris had won this month’s U.S. presidential election
‘We don’t know how other countries are going to respond to tariffs,’ she told the Australian Securities and Investments Commission’s annual forum.
‘Ultimately, if it’s not good for the Chinese economy, it isn’t good for us either.’
Australia’s unemployment rate in October remained at 4.1 per cent with 36,800 jobs created in a sign the labour market is still strong.
This is occurring as underlying inflation remains above the RBA’s 2 to 3 per cent target at 3.5 per cent.
But KPMG chief economist Brendan Rynne said the creation of just 9,700 full-time jobs in October was less than half the monthly average of 19,800 during the past year – which made an RBA rate cut likely in early 2025.
‘With the decline in inflation accelerating, and the expectation still that Australia’s labour market will weaken in the near term, the RBA will start to cut the cash rate from early next year,’ he said.
Public sector wages grew by 3.7 per cent in the year to September compared with 3.5 per cent for all other workers, with overall pay levels growing at the slowest pace in two years.
This would also make the RBA less worried about wages feeding into inflation ahead of its December meeting.
