NAB lowers fixed-loan rates

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National Australia Bank (NAB) announced on Thursday that it is discounting some of its fixed-rate mortgages. However, these markdowns are not being offered to property investors.

The bank will cut 20 basis points from its two-year fixed rate loans for home owner-occupiers with immediate effect and release a special rate of 3.49% for first-home buyers – down from 3.69%.

The “Big Four” banks, which hold nearly 80% of the mortgage market, have all recently slashed fixed rates, according to a Reuters report. The move is a cheaper way to attract new borrowers compared to cutting variable rates. Reducing the latter— a much bigger part of the banks’ mortgage book— would hurt their profits.

“Australia’s major lenders are competing to win back the market’s trust after suffering significant reputational damage over the past year in the fallout of a landmark misconduct inquiry. They will be under pressure to lower variable rates if the central bank cut rates next week, as widely expected,” Reuters said.

The Big Four – with the exception of Commonwealth Bank of Australia – have been recording below-market mortgage growth rates. In addition, these major banks have been losing market share in their key domestic home-loan market to smaller banks and non-bank lenders.

Fixed-rate loan products cover about 20% of banks’ home-loan inflows, according to analysts.

Economists are predicting that the Reserve Bank of Australia will cut the cash rate, already at a record low of 1.50%, for the first time in almost three years. The likely decision comes off the back of higher unemployment and low economic and credit growth.

 

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