CANBERRA: National Australia Bank is cutting fixed interest rates for various owner-occupied home loans to new lows among the big four, as lenders are pressured to pass on lower funding costs for fixed mortgages to their customers. NAB on Monday cut interest rates across one, two, three and four-year terms for owner-occupiers, a move that will mean its rates are below 4 per cent for all of these terms.
The rates, available only to customers paying principal and interest, will make NAB’s rates the lowest of the major banks in each of these terms, for this type of product, according to interest rate comparison website RateCity. It may signal a step-up in competition in the mortgage market, and could be followed by competitors, as banks try to ignite growth in a slowing property market.
NAB’s deepest cut was for four-year loans, where it has slashed rates from 4.59 per cent to 3.99 per cent, and for one-year loans, where it cut rates from 4.39 per cent to 3.99 per cent. The bank also sliced 0.14 percentage points off its two-year rate, to 3.75 per cent, and lowered three-year rates by 0.10 percentage points to 3.89 per cent. It did not move variable mortgage rates, which are used by the majority of borrowers.
After a recent plunge in bond yields to record lows, NAB signalled that cheaper funding costs had driven the move. “At the moment, market rates for selected fixed terms are low, so we’re able to offer these highly competitive fixed-term rates for a limited time,” a spokeswoman said. Banks are facing much lower funding costs for fixed-rate loans due in part to a global rush to government bonds, which raises bond prices and lowers their yields. Three-year government bond yields, an important influence on what banks are charged for short-term borrowing, have dropped from 2 per cent in late April to historic lows near 1.5 per cent in recent weeks.
