NAB a token price leader in mortgage market

National Australia Bank's chief executive, Cameron Clyne, says the bank will continue with its retail strategy based on aggressive mortgage pricing and low fees.

However, these days, NAB's price leadership is token. It has allowed its mortgage pricing advantage to erode over the past couple of years.

According to figures supplied by Infochoice, in the middle of 2010, when the cash rate stood at 4.5 per cent for six months, NAB's standard variable mortgage rate was 7.24 per cent.

NAB's rate was 27 basis points lower than Westpac's, 17 points lower than ANZ's and 12 points lower than Commonwealth's.

Throughout 2011, when the cash rate remained unchanged at 4.75 per cent for 12 months, NAB's rate was 7.67 per cent - 19 basis points lower than Westpac's, 14 points lower than CBA's and 13 points lower than ANZ's.

When the cash rate hit 4.25 per cent in December last year, NAB responded with a move to 7.22 per cent - 14 basis points higher than Westpac's rate, nine points higher than CBA's and eight points higher than ANZ's.

In response to last week's fall in the cash rate, to 3.75 per cent, NAB moved its rate to 6.99 per cent, which is 10 basis points lower than Westpac's rate and just two points lower than CBA's (ANZ will make its rate announcement today).

What was a 27-point discount compared with its most expensive big bank competitor two years ago is now just a 10-point difference, and what was a 12-point discount to its closest big bank competitor is now a two-point difference. It's not much to base a strategy on.