Australia’s third-largest home lender started the week with a bang on Monday morning, dropping the rate on its Tailored Variable owner-occupier loans by 78 basis points and investment loans by a hefty 1.08%.
It takes NAB's lowest advertised rate for new owner occupier principal and interest (P&I) loans to 6.79% p.a. (6.87% p.a. comparison rate*) for loan-to-value ratio (LVR) ≤60%-70%.
Here is the full list of NAB's new Tailored Variable owner occupier rates:
| Loan type | LVR | Change (%) | New rate | Comparison rate* |
| P&I | ≤60% | -0.78 | 6.79% p.a. | 6.87% p.a.* |
| P&I | 60-70% | -0.78 | 6.79% p.a. | 6.87% p.a.* |
| P&I | 70-80% | -0.78 | 6.99% p.a. | 7.07% p.a.* |
| P&I | 80-90% | -0.78 | 6.99% p.a. | 7.07% p.a.* |
| Interest Only (IO) | ≤60% | -0.78 | 7.26% p.a. | 7.07% p.a.* |
| IO | 60-70% | -0.78 | 7.26% p.a. | 7.07% p.a.* |
| IO | 70-80% | -0.78 | 7.46% p.a. | 7.27% p.a.* |
| IO | 80-90% | -0.78 | 7.46% p.a. | 7.27% p.a.* |
The new lowest advertised rate for Tailored (P&I) investment loans is now 7.09% p.a. (7.17% p.a. comparison rate*) for LVR ≤60%-70%.
NAB’s Tailored home loans come with no application fees, an offset account, and a monthly service fee of $8.
The bank’s Base Variable home loan (P&I) remains unchanged at 6.84% p.a. (6.88% comparison rate*).
What’s behind NAB’s big rate move?
NAB is the first of the big four banks to make a bold statement on the mortgage market for some months although market watchers say the new rates are likely to reflect the actual rates borrowers are currently getting at NAB.
The advertised home loan rates of the big four, particularly packaged products with offset accounts, are consistently higher than other rates on the mortgage market – some of them beginning with a 7.
Yet the latest AFG Mortgage Index figures show the market share of the big four banks rose to 61.7% of home lending in the third quarter of the 2024 financial year, driven largely by refinancing.
While the headline rates are high, many major bank customers are able to secure discounted rates much lower than headline rates.
Borrowers love a discount
It indicates what Reserve Bank of Australia data tells us – that the big four banks are offering significantly discounted rates to those they advertise.
RBA data currently puts the average variable interest rate for new owner occupier home loans at 6.28% p.a.
It goes to show the power of a discount – and perhaps some big brand loyalty – in shoring up market share.
But it’s also worth noting the latest mortgage market figures show first home buyers are increasingly preferring non-major banks.
That was the only market segment that recorded a fall for the big four banks in the last quarter, down 1.3% to 70.6% of the first home buyer market.
Another market mover
It seems NAB’s big splash earlier in the week may have stolen the show from the smaller lenders who’d been holding the stage with their fine tuning of variable rates in recent weeks.
It took until Thursday for Homestar Finance to announce cuts of up to 26 basis points to a raft of its Star home loan products.
The move puts a some of its Essential and Gold owner occupier home loan products under the 6% p.a. mark.
The “no frills” Star Essentials owner occupier P&I home loan with 80% LVR drops to 5.99% p.a. (5.99% p.a. comparison rate*).
It comes with a redraw facility but not an offset account.
The Star Classic owner occupier variable rate for P&I loans with an offset account drops to 6.09% p.a. (6.09% p.a. comparison rate*) for 80% LVR.
Image by Rebecca Orlov/Epic Playdate on Unsplash
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