NAB cuts fixed-rate loans as pricing hits 20-year lows
The move comes as most big lenders have been battling it out on pricing on fixed loans, as part of efforts to draw more borrowers to their books. However, most of the action has been on three-year loans.
NAB ,which is among the most aggressive in pricing variable rates, will cut 29 basis points from its five-year term to bring the rate to 5.55 per cent per annum, effective Monday. Commonwealth Bank is pricing five-year loans at 5.69 per cent while ANZ is the top of the market in the longer-term loans at 5.84 per cent.
Steve Mickenbecker, head of research, product and strategy at Canstar, said the move was further evidence that banks were eager to lend while the housing market remained subdued and wholesale funding was easy to get.
"The banks desperately want to grow their loan books. It's a very competitive market and I'm sure that's what's driving NAB," he said.
Almost 30 per cent of borrowers who took out a new home loan in March chose a fixed-rate loan, according to broker Australian Finance Group. This was the highest share of fixed-rate loans the broker had seen in the 10 years it has been compiling its mortgage index. NAB said a quarter of its current home loan applications were for fixed-rate loans, which reflect market expectations on interest rates and have fallen below 5 per cent for two-year products.
Mr Mickenbecker said the trend to cut fixed rates could indicate lenders were preparing to alter their variable rates. "Three-year fixed rates are currently below 6 per cent. They've been below 6 per cent four times in the last 20 years and in each case, within quite a short time, variable rates started to move up again."
The drop in pricing on fixed rates coincides with Australian bank funding costs falling to the lowest level since the global financial crisis. At the same time, banks are rolling over high-cost three and five-year funding, locked in during the depths of the global financial crisis, at cheaper rates.
Most economists expect the Reserve Bank to make at least one further cut to official interest rates this year.
Frequently Asked Questions about this Article…
NAB cut its five-year fixed home loan rate by 29 basis points to 5.55% per annum, effective Monday, taking that product to a 20-year low.
Banks are competing to grow their loan books while the housing market is subdued and wholesale funding is relatively easy. The drop in fixed-rate pricing also coincides with Australian bank funding costs falling to their lowest levels since the global financial crisis, allowing lenders to offer cheaper fixed-rate mortgages.
After NAB's cut to 5.55%, Commonwealth Bank is pricing five-year loans at about 5.69% while ANZ is around 5.84% for longer-term fixed mortgages, making NAB among the more competitive long-term fixed-rate providers.
Yes. Broker Australian Finance Group reported almost 30% of new home-loan borrowers in March chose fixed-rate loans — the highest share in 10 years of its mortgage index — and NAB said roughly a quarter of its current applications are for fixed-rate products.
Possibly. Canstar's Steve Mickenbecker noted that lenders cutting fixed rates can signal preparations to alter variable rates. Historically, when three‑year fixed rates fell below 6%, variable rates later started to move up again, so borrowers should watch developments closely.
Lower funding costs let banks roll over older, high-cost three- and five-year funding at cheaper rates, which supports reductions in fixed-rate mortgage pricing. That dynamic gives banks room to aggressively price fixed and variable products to attract borrowers.
Watch lender competition on fixed versus variable pricing, market share trends for fixed-rate loans, bank funding-cost headlines, and Reserve Bank guidance — economists in the article expect at least one more RBA cut this year, which could influence mortgage pricing and investor sentiment.
The article points to a mix of factors: funding costs are low and banks want to grow loans, but historical patterns show variable rates can move after fixed rates fall. The outlook is uncertain, so investors and borrowers should monitor RBA moves and lender pricing closely.
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