Big four bank reduces mortgage interest rates ahead of RBA meeting

One of the big four banks has made a major call ahead of any Reserve Bank of Australia decision to cut the cash rate.

NAB has become the first of the big four to cut interest rates, weeks before the RBA is tipped to lower the cash rate.

According to Canstar, the cuts for owner-occupier fixed rates were up to 0.25 percentage points, while the cuts for investor fixed loans were up to 0.30 percentage points.

Following Monday’s announcement, NAB’s lowest fixed rate is now 5.84 per cent, available for owner-occupiers paying principal and interest with a deposit of at least 20 per cent on a three-year term.

NAB has become the first of the big four banks to move on rates in 2025. Picture: NewsWire / Nicholas Eagar

Canstar data insights director Sally Tindal said with NAB cutting rates others were likely to follow.

“The cost of wholesale fixed rate funding has started to ease slightly. This, combined with a prospective cash rate cut, should push other banks into moving on fixed rates,” she said.

“While a few banks are now starting to sharpen their offerings, fixed rates still have a way to fall before they become fashionable again with borrowers.”

NAB’s move comes before the RBA meeting on February 17-18 when the board is largely expected to cut the official cash rate from 4.35 per cent to 4.10 per cent.

Last week, NAB became the last of the major banks to call an interest-rate cut when the central bank meets in February.

“We now expect the RBA to cut the cash rate by 25 basis points in February,” NAB chief economist Alan Oster wrote in a note.

“The Q4 CPI confirms that inflation has moderated more quickly than the RBA expected and sets up a likely downward revision to the inflation profile in the February statement on monetary policy.

“This now makes February the most likely starting point for a gradual easing in interest rates.”

Ms Tindall said NAB was moving on rates as many mortgage holders patently waited for a rate cut.

“Many homeowners have been waiting for well over a year for a cash rate cut. It’s hard to see them throwing in the towel and switching to a fixed rate now when the RBA is poised to move,” she said.

“That said, there’s no guarantee we’ll see a barrage of cash rate cuts and borrowers should factor this into their thinking.

Mortgage holders are desperately waiting for the RBA to cut rates. Picture: NewsWire/ Monique Harmer

NAB is the first of the majors to drop its fixed rates this year, with the last fixed rate cuts from the big four recorded on October 28, 2024 from ANZ.

Canstar says despite the cuts, ANZ still has the lowest fixed rate of the big four banks – 5.74 per cent for a two or three-year term.

But mortgage holders could be getting a better deal if they were to look outside of the major banks.

Canstar said the lowest fixed rates in the market were still well below the big bank offerings, with SWSbank continuing to offer a highly competitive 4.99 per cent for a fixed term of three years. However, this rate is reserved for owner-occupiers with a loan size of $800,000 or more.

Originally published as Big four bank reduces mortgage interest rates ahead of RBA meeting