NAB makes 'whopping' home loan interest rate cut but lifts some other rates

Borrowers are set for an interest rate shake-up today, with National Australia Bank (NAB) raising interest rates across many of its fixed rate home loan products, but lowering a number of variable and one-year fixed rates.

National Australia Bank’s home loan rate changes

NAB has today cut interest rates on many of its one-year fixed home loan products – as well as some variable rates for owner-occupiers – while raising rates across a number of other fixed home loans. For example, it cut the rate on its owner-occupier Choice Package product by 0.10 percentage points, taking it below the 2% mark to 1.99% (comparison rate 4.15%). NAB also increased interest rates by 0.10 percentage points each on its two-, three- and four-year owner-occupier fixed rate home loan products, and raised the rate on five-year fixed owner-occupier loans by 0.20 percentage points.

The bank has made similar moves across many of its fixed rate home loan products for owner-occupiers, lowering the interest rate on one-year fixed rate loans on its Portfolio Package/Private Portfolio Package and Choice Package/Private Tailored Package home loans, while raising rates on the same loans across two, three, four and five year fixed rate terms. For investors, NAB has also cut rates on one-year fixed rate products while raising rates on two, three four and five-year fixed products.

On the variable rate front, NAB cut rates on its Base Variable Rate product by 0.40 percentage points to 2.29% (comparison rate 2.33%) for owner-occupiers with a loan-to-value ratio (LVR) of up to 80% (a deposit of at least 20%), and by 0.05 percentage points to 2.99% (comparison rate 3.03%) for borrowers with a higher LVR than this.

What do today’s changes mean for Australian home buyers?

Canstar finance expert Steve Mickenbecker said of the changes: “NAB is the last of the major bank dominoes to fall, announcing that it is joining its peers in cutting its one-year fixed rate and hiking longer-term rates. NAB has also followed Commonwealth’s lead in cutting its basic variable rate, in NAB’s case by a whopping 0.40 percentage point decrease for deposits of 20% or more.” 

Mr Mickenbecker said that the banks are “very keen” to entice variable rate loan customers, in expectation that we will be in a rising interest rate environment in a couple of years. “Borrowers with smaller deposits below 20% will be paying a huge margin above the higher deposit group, 2.99% compared to 2.29%, which is not great news for first home buyers.”

He said that when the reserve bank next meets on Tuesday, November 2, the expectation is that it will leave the official cash rate unchanged at 0.10%, but the big bank moves over the last two weeks demonstrate that the banks will “do their own thing” when it comes to home loan interest rates.

“The other likelihood is that when the banks do their own thing, the big four are all likely to do much the same thing,” he said.

“At the moment, that is low variable and one-year fixed rates, and rates for fixed terms beyond a year drifting up.”

How do NAB’s home loan rates compare?