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NAB cuts interest rates as stressed Aussie borrowers pushed to 'sell homes'

The bank's three-year fixed rate has fallen below 6 per cent.

Stewart Perrie
·Senior Journalist
·4-min read
Person walking outside a NAB branch next to a bubble of Aussie homes
NAB has become the first of the big four banks to drop its three-year fixed-rate mortgage this year and has now brought it to 5.99 per cent. (Source: Getty)

NAB has become the first of the big four banks to cut its fixed-term mortgage rate this year. The move will only affect owner-occupiers on a three-year fixed rate paying principal and interest, but it's been called a "strategic" decision amid fears of one or possibly two rate rises from the Reserve Bank of Australia (RBA) in the coming months.

The three-year fixed rate for a mortgage holder that owns at least 30 per cent of their property has fallen by 0.60 percentage points from 6.59 per cent to 5.99 per cent. If the loan-to-value ratio is below 30 per cent, the fixed rate has fallen from 6.64 per cent to 6.04 per cent.

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

“A big bank fixed rate that starts with a ‘5’ is likely to turn at least a few heads, particularly among those worried about the prospect of further cash rate hikes."

Fixed rates peaked in popularity in mid-2021, according to the Australian Bureau of Statistics, with 46 per cent of mortgage holders choosing that option. However, that has fallen dramatically since, with just 1.7 per cent of new and refinanced loans being fixed in May.

While Tindall said it could attract some Aussies worried about future RBA rate hikes, she added that locking yourself into a rate for three years is a "big financial commitment".

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“[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," she 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."

She warned that being in a fixed rate doesn't "typically" allow you access to an offset account and there can be caps on making extra repayments. Tindall said fixed rates can give you peace of mind, but they can "also be a lot more work" when it comes time to renegotiate your loan.

NAB's move now sets it far from Commonwealth Bank, Westpac and ANZ, here's how they compare:

  • NAB: 5.99 per cent

  • CBA: 6.59 per cent

  • Westpac: 6.59 per cent

  • ANZ: 6.59 per cent

Apart from CommBank's Unloan, NAB's new three-year fixed rate is the only one out of the big four under 6 per cent.

The closest to NAB is Westpac's two-year fixed rate, which is 6.49 per cent.

This is a question many homeowners face when signing up for a mortgage or having it refinanced.

The number of Aussies who have fixed their mortgage rate is at the fourth lowest level in ABS history as many are holding out hope the RBA will cut its rate sooner rather than later.

However, sluggish inflation has some economists predicting a rate rise when the central bank meets next month.

NAB originally predicted a rate cut would come in November this year, however, that has now been revised to May 2025.

Rate City said a short-term fixed rate isn't the "silliest idea" but stressed Aussies should look for a competitive rate and be prepared to refinance or renegotiate the moment the fixed rate expires.

New Finder data has revealed 165,000 households will have to sell up if the current cash rate of 4.35 per cent continues into next year.

A similar number of people predict they would have to ask the bank for a repayment holiday, rent out a room for some extra cash, or borrow more money to afford mortgage repayments if the cash rate remains stuck.

“Many homeowners are stretched so thin financially, they’re facing the prospect of having to sell their home, or they’re turning to loved ones for support with paying their bills,” Finder personal finance adviser Sarah Megginson said.

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