In a bold move ahead of the Reserve Bank of Australia’s (RBA) February meeting, National Australia Bank (NAB) has become the first of the big four banks to lower its fixed mortgage rates. This rate reduction, which applies to both owner-occupiers and investors, comes as market expectations for a cash rate cut from the RBA grow stronger.
NAB’s Early Rate Cut
NAB has announced a significant reduction in fixed-rate mortgages. For owner-occupiers, the bank has cut rates by up to 0.25 percentage points. For investor fixed loans, the reduction is even greater at up to 0.30 percentage points. As a result, NAB’s lowest fixed rate for owner-occupiers is now 5.84 percent. This rate applies to principal and interest loans with a deposit of at least 20 percent on a three-year term.
This rate cut has placed NAB ahead of its competitors in the race to adjust mortgage offerings. According to Canstar data insights director, Sally Tindal, other banks are expected to follow suit. “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.
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Anticipation of Cash Rate Cut
The RBA is scheduled to meet from February 17 to 18, and analysts widely expect the central bank to reduce the official cash rate from 4.35 percent to 4.10 percent. NAB’s decision to lower its fixed-rate mortgages ahead of this meeting indicates its confidence in an imminent rate reduction.
NAB’s chief economist, Alan Oster, shared in a note that the central bank’s monetary policy would likely begin easing soon. “We now expect the RBA to cut the cash rate by 25 basis points in February,” Oster said. He attributed this expectation to recent data showing that inflation had moderated more quickly than anticipated.
A Shift in Market Trends
NAB’s decision to cut rates is a clear signal to other major banks, but the competition is heating up. While NAB was the first to move in 2025, ANZ still offers the lowest fixed rates among the big banks. ANZ’s fixed-rate mortgages for two and three-year terms are currently at 5.74 percent, slightly lower than NAB’s rates.
However, as Tindal pointed out, the fixed-rate market still has room to improve. “Fixed rates still have a way to fall before they become fashionable again with borrowers,” she said. This sentiment reflects the broader expectations for the market, which is still adjusting to the fluctuating cost of fixed-rate funding.
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NAB’s Economic Forecasts
In addition to reducing mortgage rates, NAB’s economists predict further interest rate cuts in the months ahead. The bank forecasts up to five cash rate cuts in 2025, although some analysts, such as those at ANZ, anticipate only two rate reductions.
According to Oster, the rapid moderation of inflation will likely lead to a downward revision of 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,” he wrote.
This forecast has further contributed to the growing sense that the RBA will initiate a series of rate cuts to help stimulate economic activity.
Implications for Mortgage Holders
The timing of NAB’s rate cut is significant, especially as many mortgage holders have been waiting for a reduction in the official cash rate. As the first big bank to act on rate cuts, NAB may set the pace for other lenders in the coming months.
Despite the rate cuts, many borrowers are still cautious about switching to fixed-rate mortgages. Tindal noted, “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.”
While the reduction in fixed rates may appeal to some borrowers, Tindal advised that there is no guarantee of a flood of cash rate cuts. Borrowers should keep this in mind as they assess their options.
Competitive Edge in the Market
In the midst of this shifting mortgage landscape, NAB’s rate cut may prompt other banks to sharpen their competitive edge. According to Canstar, some smaller lenders have already outpaced the big banks in terms of offering more competitive fixed-rate options. For instance, SWSbank is offering a fixed rate of 4.99 percent for owner-occupiers with a loan size of $800,000 or more.
Despite this, the big banks’ dominance remains significant, with NAB now aligning with Westpac in offering the lowest one-year fixed rate among the major lenders. As Tindal explained, “We’d hope to see competition really ramp up in that space as we get towards a cash rate cut.”
Looking Ahead
While the recent rate cut by NAB is a sign of shifting market conditions, the future of fixed-rate mortgages remains uncertain. The outlook for further cuts to the official cash rate will play a major role in shaping borrowers’ decisions.
As the RBA prepares for its February meeting, many Australians are eagerly anticipating the outcome. With interest rates expected to decline gradually, mortgage holders should carefully assess their options, as the rate environment continues to evolve. Whether more rate cuts will follow depends on the actions of the central bank and the wider economic context, making this a crucial time for both homeowners and investors.
In summary, NAB’s decision to cut mortgage rates marks the start of a potential shift in the lending landscape. With more rate cuts expected, borrowers may have more opportunities to secure competitive mortgage rates in the coming months.
