Consumers are set to be winners as big banks and financiers go to digital war in the housing market.
A big four bank has jumped the gun on the RBA, slashing its variable home loan rate in what could trigger a flurry of early Xmas presents for homeowners and buyers.
National Australia Bank’s basic variable rate for home loans has been cut by 40 points to 6.44 per cent, with the out-of-cycle slash potentially saving new customers on a $500k loan around $126 in monthly repayments.
The cut comes as experts expect fierce competition ahead between banks and financiers using digital-only offers – with two of the big four already moving that way – CommBank and ANZ Plus.
Canstar Data Insights director Sally Tindall.
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Mozo personal finance expert Rachel Wastell said “NAB has just handed new customers an early Christmas present, slashing its lowest variable rate just before the holiday season – jumping the gun on the RBA without forcing borrowers to go digital to save”.
She said “when looking at the size of RBA rate cuts historically, the RBA likely would only have cut 25 basis points if they moved in November, so this is pretty close to the value of two RBA cuts”.
“This substantial, out-of-cycle cut could be NAB’s response to intensifying competition between the big four banks, two of which are offering low rate digital-only home loan options for borrowers,” Ms Wastell said.
Canstar.com.au data insights director, Sally Tindall, said “since August the number of lenders cutting new customer variable rates has far outweighed the number of lenders hiking these rates”.
Canstar data shows 14 new customer rates were cut across the market in July, 12 in August, 13 in September, 17 in October and so far seven in November.
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“Among the big four, CBA cut select new customer rates in August this year and NAB also cut the advertised rates on its Tailored Home Loan in April.”
NAB’s 6.44pc variable rate is the lowest in-branch access offer for new customers among the big four banks, given ANZ’s 6.14pc and CBA’s 6.19pc available for digital only customers with no branch access and only for refinancing – not new customers.
Ms Tindall said “NAB’s no-frills mortgage rate has, for months, been an outlier among the big four, especially since the introduction of CBA’s and ANZ’s digital-only home loans. This rate cut by NAB brings its lowest variable rate back in line with the big bank pack.”
She said “existing NAB borrowers could find today’s news frustrating, as these rate cuts are only on offer for new customers. However, if you’re an existing customer, there’s absolutely nothing stopping you from picking up the phone and asking for a rate cut.”
Existing customers have already reported having success reducing their interest rate after today’s announcement of the lowered rate for new customers.
Working out what a competitive rate is was the best idea Ms Tindall said.
Ms Tindall said “before you play hardball, jump online and work out what a competitive rate looks like. Canstar’s site shows there are 38 lenders offering at least one variable rate under 6 per cent.”
Ms Wastell said for new customers NAB’s 6.44pc rate was a reduction of about $189 to month repayments on a $750k loan with the bank, and up to $251 a month for a $1 million loan.
She said it could be the breath of fresh air buyers need ahead of Christmas and urged those with existing loans to renegotiate.
It’s NAB’s first cut in a year to the base rate after a 25 bps hike in November 2023, though it did cut its tailored variable home loan by 78 points in April.
The reduced interest rate comes as NAB amended its expectation for the first cash rate cut to May next year, after initially forecasting in September that the first drop would be February 2025.
“We revert to our earlier expectation for a first cut in May 2025. From there we continue to see a steady profile of one cut per quarter back to 3.10pc by mid 2026,” a statement by NAB Group Economics said.
“There are only two more employment prints and one quarterly CPI before the February 18 meeting. Given the data flow to date, it now looks unlikely the RBA will have enough confidence in the trajectory of inflation by then. There is a real risk that policy rates stay on hold even deeper into 2025.”
The bank said they expected rates to “move lower over time” but RBA had “little urgency to adjust policy settings while both inflation and the unemployment rate are evolving gradually”.
“For Australia, the cutting phase will be later and ultimately shallower.”
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