Big bank puts in double rate cut ahead of Reserve Bank move

Composite image of Australia’s ‘big four’ banks ANZ, Westpac, the Commonwealth Bank and the National Australia Bank. (AAP Image)

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A big four bank has become the first to slash interest rates this year, a double cut two weeks ahead of the Reserve Bank’s February meeting – with more expected to follow.

The decision saw National Australia Bank’s fixed rate mortgage across all loan terms cut by 0.25 percentage points for all owner-occupied property which investors were handed an even bigger 0.3 percentage point drop.

The last time any of the big four banks moved to lower interest rates was ANZ in October though they still have a long way to go to compete with the lowest fixed rates in the market – with SWSbank offering 4.99 per cent for a fixed term of three years for owner-occupiers with loans of $800,000 or more.

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The lowest fixed rate is now 5.84 per cent at NAB for owner occupiers paying principal and interest with a deposit of at least 20 per cent on a three-year term but ANZ still has the lowest at 5.74 per cent for two and three year terms.

The move could trigger a fresh round of interest rate reductions for homeowners, with Canstar.com.au data insights director, Sally Tindall saying “other banks likely to follow”.

“The cost of wholesale fixed rate funding has started to ease slightly. This, combined with a prospective cash rate cut, should push other banks into moving on fixed rates,” she said.

Ms Tindall expected fixed rates to go even lower in this cycle.

“Fixed rates still have a way to fall before they become fashionable again with borrowers.”

“Many homeowners have been waiting for well over a year for a cash rate cut. It’s hard to see them throwing in the towel and switching to a fixed rate now when the RBA is poised to move. That said, there’s no guarantee we’ll see a barrage of cash rate cuts and borrowers should factor this into their thinking.”

She said NAB economists expected as many as five cash rate cuts over the next year, while ANZ was forecasting just two.

“This discrepancy has the capacity to tip the fixed versus variable equation both ways. In times like these, it’s best to put the crystal ball aside, think practically, and be ready for any outcome.”