One of Australia’s major banks has surprised the market with a significant change in its interest rates. NAB removes interest rate tiers and Westpac lowers fixed interest rates. Westpac is reducing fixed rates for specific loans. NAB is levelling the field for owner-occupiers by making adjustments to mortgage rates.
NAB has decided to do away with the tiered rate system based on deposit sizes for its basic variable loan. This means that all customers with this mortgage will now be charged 6.49 per cent. For owner-occupiers with deposits under 20 per cent, this translates to a notable reduction of 0.70 percentage points, bringing the rate down from 7.19 per cent to 6.49 per cent.
RateCity’s research director, Sally Tindall, pointed out that this move goes against the current trend among the major banks.
“This move from Australia’s third-largest home loan lender is quite unusual,” remarked Ms. Tindall.
“In recent years, banks have been shifting towards a risk-based pricing model, resulting in higher rates for borrowers with smaller deposits. NAB removes interest rate tiers by specifically extending a welcoming hand to owner-occupiers with modest deposits. Many are first-time buyers eager to find affordable entry points into the market.”
In a communication to its customers on Wednesday, Westpac announced a reduction in its two-year fixed rates for Investment Property Loans. Simultaneously, the bank has raised its Flexi First Home Loan by 0.10 percentage points, thereby reducing the two-year introductory and promotional discounts.
Under the new structure, those with a deposit exceeding 30 per cent will be subject to a 6.09 per cent interest rate for the initial two years, before it increases to 6.49 per cent. Meanwhile, individuals with a 20 per cent deposit will face a 6.19 per cent interest rate for the initial two years, followed by a subsequent increase to 6.19 per cent.
The recent adjustments don’t impact the loan’s base rate. This minor shift means that none of the major four banks provide mortgage holders with an interest rate below 6%.
NAB removes interest rate tiers & Westpac lowers fixed interest rates. Sally Tindall is the Research Director at RateCity. He characterized this move as a “strategic step away from the fierce competition in the home loan market.” She further emphasized, “Westpac’s action closes the door on advertised variable rates below 6% from the major four banks. It’s improbable that we’ll see such advertised rates until the RBA initiates cash rate reductions.”
Tindall noted the contrasting strategies of Westpac. It raised its basic variable loan rate. NAB on the other hand reduced it for owner-occupiers with limited deposits. He stated that Westpac is following the market trend while NAB is diverging from it.
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