NAB has become the first of the big four banks to cut its fixed-term mortgage rate this year. The move will only affect landlords with a three-year fixed rate paying principal and interest, but has been called a “strategic” decision amid fears of one or two rate hikes from the Reserve Bank of Australia (RBA) in the future. month.
The three-year fixed rate for a mortgage holder who owns at least 30 per cent of their property has fallen by 0.60 percentage points from 6.59 per cent to 5.99 per cent. If the loan-to-value ratio is below 30 percent, the fixed rate has dropped from 6.64 percent to 6.04 percent.
“This is a strategic move by NAB in an attempt to test whether there is any appetite among borrowers to return to regulation,” Rate City research director Sally Tindall said.
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“A big bank fixed rate starting with ‘5’ is likely to turn at least a few heads, particularly among those worried about the prospect of further cash rate rises.”
Fixed rates peaked in popularity in mid-2021, according to the Australian Bureau of Statistics, with 46 per cent of mortgage holders choosing that option. However, this has fallen dramatically since then, with just 1.7 percent of new and refinanced loans fixed in May.
While Tindall said it could appeal to some Aussies worried about the RBA’s next rate hike, she added that locking in one rate for three years is a “huge financial commitment”.
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“[RBA] governor [Michele] Bullock has said the cash rate is in ‘boundary territory’, meaning it is likely to fall at some point, however, even the RBA does not know exactly when, by how much and if at all. we are likely to see more. growth before then,” she said.
“For those looking for relief from having to follow every RBA opinion, a fixed rate could be the reassurance they need, even if they end up paying more for that peace of mind.
“For those looking to pay the lowest possible interest rate, it can end up being a gamble between a very competitive variable rate and a short-term fixed rate.”
She warned that being on a fixed rate does not “usually” allow you to access an offset account and there may be restrictions on making extra payments. Tindall said fixed rates can give you peace of mind, but they “can also be a lot more work” when it comes time to renegotiate your loan.
How does NAB’s fixed rate compare to the Big Four?
NAB’s move now puts it well ahead of Commonwealth Bank, Westpac and ANZ, here’s how they compare:
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NAB: 5.99 percent
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CBA: 6.59 percent
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Westpac: 6.59 per cent
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ANZ: 6.59 percent
Apart from CommBank’s Unhua, NAB’s new three-year fixed rate is the only one of the big four below 6 per cent.
Closest to NAB is Westpac’s two-year fixed rate, which is 6.49 per cent.
Should I fix my home loan or keep it variable?
This is a question many homeowners face when signing up for a mortgage or refinancing it.
The number of Australians who have fixed their mortgage rate is the fourth lowest in ABS history, as many hope the RBA will cut its rate sooner rather than later.
However, sluggish inflation has some economists predicting a rate hike when the central bank meets next month.
NAB initially predicted a rate cut would come in November this year, however, it has now been revised to May 2025.
Rate City said a short-term fixed rate is not “the dumbest idea”, but stressed that Aussies should look for a competitive rate and be prepared to refinance or renegotiate when the fixed rate expires.
New Finder data has revealed that 165,000 households will have to sell if the current cash rate of 4.35 per cent continues next year.
A similar number of people predict they will need to ask the bank for a repayment holiday, rent out a room for some extra money or borrow more money to meet mortgage payments if the cash rate remains stuck .
“Many homeowners are so financially strapped, they’re facing the prospect of selling their home, or turning to loved ones for support with paying their bills,” said Finder personal finance advisor Sarah Megginson.
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