National Australia Bank has decided to make a big pitch for new residential borrowers with fat deposits after slashing one of its variable home loan rates on Wednesday.
The bank has crunched its basic variable rate for owner occupiers not requiring mortgage insurance by 40 basis points to 2.29 per cent.
However, there is scant relief for low deposit borrowers requiring mortgage insurance who will be levied interest at a rate of 2.99 per cent if they sign up for the same product.
While NAB’s price moves on variable rates are noticeably deeper than recent changes at other major banks, they nonetheless mirror an industry-wide pricing trend aimed at luring borrowers to variable products.
NAB has also repriced most fixed rate loans for owner occupiers and investors.
One year fixed rates have been cut by 10 basis points to 1.99 per cent for owner occupiers and 15 basis points to 2.39 per cent for investors.
However, all other fixed rates for up to five years across borrower categories have been hiked by between 10 and 20 basis points.
Canstar director Steve Mickenbecker believes the major banks are making variable rates more attractive ahead of the economy entering a rising rate cycle.
“The banks are very keen to entice variable rate loan customers, in expectation that we will be in a rising interest rate environment in a couple of years,” he said.
“NAB borrowers with smaller deposits below 20 percent will be paying a huge margin above the higher deposit group, 2.99 percent compared to 2.29 percent, which is not great news for first home buyers.”
The consensus view of leading economists is that the Reserve Bank will keep official rates on hold at its monthly meeting in Sydney next week.
According to economists at HSBC and Deutsche Bank, the RBA is expected not to raise the cash rate until 2024.
While the central bank seems committed to the hyper-relaxed monetary settings for helping to sustain the economic recovery, Mickenbecker is adamant that the central bank will exercise diminishing influence over the cost of housing credit.
“The expectation is that next Tuesday the Reserve Bank will leave the Cash Rate unchanged at 0.10 percent, but the big bank moves over the last two weeks demonstrate that the banks will do their own thing when it comes to home loan interest rates,” he said.
“The other likelihood is that when the banks do their own thing, the Big Four are all likely to do much the same thing. At the moment, that is low variable and one-year fixed rates, and rates for fixed terms beyond a year drifting up.”