NAB Takes the Lead in Rate Cuts as RBA Prepares for Cash Rate Decrease
The National Australia Bank (NAB) has recently made a bold move by cutting its fixed-interest mortgage rates, becoming the first among the big four banks to do so in 2025. This decision comes ahead of an anticipated rate cut from the Reserve Bank of Australia (RBA), with market analysts predicting a reduction in the official cash rate by February. NAB’s move signals a shift in the mortgage landscape, particularly as it lowers rates for owner-occupiers by up to 0.25 percentage points and for investor loans by up to 0.30 percentage points. This action is expected to prompt other major banks to follow suit, leading to even greater competition in the mortgage sector.
The timing of NAB’s decision aligns with growing expectations that the RBA will cut the cash rate from 4.35% to 4.10% at its upcoming meeting scheduled for February 17-18. This shift comes on the back of inflation numbers for the final quarter of 2024, which showed that inflation has moderated faster than previously expected. According to NAB’s chief economist, Alan Oster, this reduction in inflation sets the stage for a gradual easing of interest rates, with February being the likely starting point.
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Sally Tindal, Canstar's data insights director, mentioned that with NAB’s move, other lenders will likely start sharpening their fixed-rate offerings. Although fixed rates are still relatively high, they are beginning to ease, thanks to a slight reduction in the cost of wholesale funding. Tindal notes that fixed rates are far from becoming attractive for most borrowers just yet, but this could change as more cuts follow.
The anticipation of a rate cut has been building for over a year, with many homeowners eagerly awaiting relief from the sustained higher rates. However, experts caution that while the rate cut may provide some immediate relief, it may not be enough to significantly ease the financial strain for many mortgage holders. With the cost of living still a concern, borrowers should be mindful that future rate cuts may be more gradual than hoped.
This news is particularly notable as NAB is now offering its lowest fixed rate at 5.84% for a three-year term, for owner-occupiers with at least a 20% deposit. Interestingly, while NAB has moved first, other smaller lenders, like SWSbank, are offering even more competitive rates, such as a fixed three-year term rate of 4.99%. This is reserved for loans of $800,000 or more, however, highlighting that homeowners could potentially find better deals outside of the major banks.
The coming months will likely see more fluctuations in the mortgage market, especially as the RBA is expected to continue its efforts to bring inflation down. For now, NAB's rate cut is a significant step in what could become a broader shift in lending rates, as other banks look to adjust their offerings in the face of an impending RBA move.
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