Banking giant NAB cuts 3-year fixed mortgage rate

One of Australia’s biggest banks has just delivered a big gift to Aussies desperate to lock down a home of their own.

One of Australia’s biggest banks has just delivered a surprise gift to home hunters struggling to lock down a home of their own.

NAB, the $115bn behemoth, has cut its three-year fixed rate on home loans by 0.6 per cent to 5.99 per cent.

The interest rate drop makes NAB the first of Australia’s “big four” banks to offer prospective buyers a loan product with a ‘five’ in front of it, with the exception of Commonwealth Bank’s Unloan offerings.

It also marks the first fixed rate change from a big bank this year, according to RateCity.

“This is a strategic move from NAB in a bid to test whether there’s any appetite among borrowers to revert back to fixing,” RateCity research director Sally Tindall said.

“A big bank fixed rate that starts with a ‘five’ is likely to turn at least a few heads, particularly among those worried about the prospect of further cash rate hikes.

“The popularity of fixed rates peaked back in July 2021 when 46 per cent of new and refinanced loans opted for a fixed rate, according to the ABS.

“This now sits at just 1.7 per cent in the most recent data.

“It’s hard to see people flocking back to fixed rates but this rate under 6 per cent from NAB is designed to test this.

NAB is cut its rate on three-fixed home loans to 5.99 per cent. Picture: NewsWire / Roy VanDerVegt

“However, fixing for three years is a big financial commitment at any time but particularly when the future of the cash rate remains highly uncertain.”

The cut is only for the three-year product and only for owner-occupier borrowers paying principal and interest.

Borrowers must own at least 30 per cent of their property for a loan-to-value ratio of 70 per cent or less.

NAB rivals Commonwealth Bank, Westpac and ANZ offer three-year fixed rates of 6.59 per cent.

For five-year products, CBA and Westpac offer loans at 6.69 per cent, while NAB offers 6.79 per cent and ANZ offers 6.84 per cent.

Ms Tindall said a fixed rate could offer borrowers some relief from tracking every thought and expression from the Reserve Bank of Australia.

The RBA sets the cash rate, which serves as a benchmark for interest rates across the economy.

“RBA Governor Michele Bullock has said the cash rate is in ‘restrictive territory’, which means it’s likely to come down at some point, however, not even the RBA knows exactly when that will be, by how much, and whether we’re likely to see more hikes before then,” Ms Tindall said.

“For those looking for some relief from having to follow the RBA’s every thought, a fixed rate could be the certainty they need, even if they end up having to pay more for that peace of mind.

“For those looking to pay the least amount of interest possible, it could end up being a gamble between a highly competitive variable rate and a short term fixed one.”

“The RateCity.com.au database shows the lowest one-year fixed rate is sitting at 5.74 per cent, while the lowest variable is just 0.01 percentage point higher at 5.75 per cent.

“There’s barely a crack of light between the two rates but a couple of cash rate changes either way would change this equation entirely.

“Borrowers considering a fixed rate should know these loans are a lot less flexible, with caps on extra repayments and typically no access to an offset account.

“Short-term fixed rates can also be a lot more work as you’ll need to renegotiate your loan, or potentially refinance at the end of the fixed rate period.

“The last thing you want to do is roll over onto a highly uncompetitive variable rate after the fixed rate term expires.”