One of the nation’s largest lenders has announced deep cuts in its home loan rates as competition continues to heat up in the market.
National Australia Bank has slashed a slew of fixed mortgage rates as the COVID-19 economic downturn continues.
The major banking group cut a number of fixed-rate mortgages by 5 to 55 basis points, with some homeowner loans falling below 2%.
NAB’s three-year fixed rate was cut 11 basis points to 1.98%, while its five-year fixed homeowner loan fell 55 basis points to 2.24%.
The rate carving puts NAB in line with some of the other majors.
NAB executive Andy Kerr said rates remained at historic lows, fueling a surge in demand in the residential real estate market.
“Over the past few months, home loan applications have been at their highest level in several years as buyers flock to the market after a quiet period through nationwide lockdowns,” Mr Kerr said. .
“Our three- and four-year fixed rates for homeowners paying principal and interest are now below 2%, a level that would have seemed unbelievable just a few years ago.”
According to the NAB, house price growth in Australian capital cities is expected to increase by 10% throughout 2021.
The lowest advertised three-year fixed rate of 1.75% is advertised by NAB subsidiary UBank, while Homestar Finance offers the lowest variable rate of 1.79%.
According to RateCity research director Sally Tindall, other major players could cut lending rates after NAB’s decision.
“NAB’s rate cuts today will put pressure on other major banks to consider revising their rates,” Ms Tindall said.
“As we approach the bottom of the rate cycle, provided cash rates stay above zero, we could see one or two of the other big banks follow suit with some minor cuts in the coming weeks.”
The low interest rate environment comes after the Reserve Bank fixed the official exchange rate at 0.1% in response to the coronavirus pandemic.
The RBA also adopted quantitative easing and a term funding facility to flood the money market with liquidity and keep the cost of new debt low.
Canstar executive Steve Mickenbecker said NAB has cut fares in part to stay competitive.
“Low-cost funding has made fixed rates the playground of the big banks and as long as the Reserve Bank’s term funding facility remains available, bargains should remain strong,” he said.