NAB shaves up to 55 basis points off home loan rates

NAB shaves up to 55 basis points off home loan rates

One of the country’s largest lenders has announced major cuts to its home loan rates as competition continues to heat up in the market.

The major banking group has cut between five and 55 basis points off a number of fixed mortgages, with some owner-occupier loans dipping below 2 per cent.

NAB’s three-year fixed rate has been shaved by 11 basis points to 1.98 per cent, while its five-year fixed owner-occupier loan shed 55 basis points to 2.24 per cent.

The rate carving puts NAB in line with some of the other majors.

NAB executive Andy Kerr said rates remained at historic low levels, fuelling a surge in demand within the residential property market.

“For the past few months, home lending applications have been at their highest level in several years as buyers flock back into the market after a quiet period through the nationwide lockdowns,” Mr Kerr said.

“Both our three- and four-year fixed rates for owner-occupiers paying principal and interest are now below 2 per cent, a level that would have seemed unbelievable just a few years ago.”

According to NAB, house price growth across Australian capital cities is expected to rise by 10 per cent throughout 2021.

The lowest three-year fixed rate advertised of 1.75 per cent is being advertised by NAB’s subsidiary UBank, while Homestar Finance offers the lowest variable rate of 1.79 per cent.

According to RateCity research director Sally Tindall, other major players could shave lending rates after NAB’s decision.

“NAB’s rate cuts today will put pressure on the other big banks to think about reviewing their rates,” Ms Tindall said.

“While we’re nearing the bottom of the rate cycle, provided the cash rates remains above zero, we could see one or two of the other big banks follow suit with some minor cuts in the weeks to come.”

The low-interest environment comes after the Reserve Bank set the official cash rate at 0.1 per cent in response to the coronavirus pandemic.

The RBA has also enacted quantitative easing and a term funding facility to flood the money market with liquidity and keep the cost of new debt down.

Canstar executive Steve Mickenbecker said NAB had lowered rates in part to remain competitive.

“Low cost funding has made fixed rates the playground for the big banks and while the Reserve Bank term funding facility remains available, the great deals should stay strong,” he said.