Race to the bottom: How the big four compare?

  • By Christine St Anne

As National Australia Bank moved to cut its home loan variable rate, it starting to look like when and by whom rates breach the 2 per cent mark.

This is the assessment of Canstar’s Steve Mickenbecker following Thursday’s announcement that NAB would cut its variable and fixed home loans with decreases of up to -0.15 per cent across a number of owner-occupied and investment loans

The NAB Base Variable Rate special offer has been reduced by 0.15 per cent per annum to 2.69 per cent per annum for owner occupiers paying principal and interest who have at least a 20 per cent deposit. 

NAB fixed rates have been reduced for both owner-occupiers and residential investors paying principal and interest, with NAB Choice Package fixed rates now starting at 2.19 per cent per annum for owner-occupiers and 2.49 per cent per annum for residential investors.

In crunching the numbers, Canstar has assessed that the NAB rate cut to 2.69 per cent is equal to that of Westpac as the lowest of the big four banks. 

Mickenbecker sees the possibility of variable rates reaching lows of 1.99 per cent as the big banks take advantage of record low wholesale funding rates and keep cutting rates. 

“The rate race is on and the big four banks are in the running,” Mickenbecker said. 

According to Mickenbecker, the 0.10 per cent cuts to a range of principal and interest 1 and 2 year fixed rates confirms fixed rate lending continues as the banks’ instrument of choice, as they jockey for share of booming refinance demand in an otherwise flat lending market. 

Industry research to date has indicated momentum has picked up in the refinancing segment of the mortgage market.

And according to RFi Group research, awareness on home pricing is growing in the market. 

RFi Group data has found that mortgage holders have become significantly more aware of the interest rate they are paying on their loan over the last September quarter, especially those who have a variable rate loan

In fact, the research has shown that over the last 3 years rate sensitivity amongst borrowers has increased, with more borrowers willing to switch their provider solely to access a lower rate

Importantly, those who think their interest rate is higher in comparison to the market are more to refinance in the next 12 months and switch their provider when they do so.