NAB Leads the Way with Fixed Rate Cuts

NAB has become the first of the big four banks to lower its fixed rate mortgages in 2025, just two weeks before the Reserve Bank of Australia (RBA) is expected to announce a cash rate cut. The move signals a shift in lending conditions, with more banks likely to follow suit.

How Low Did NAB Go?

NAB’s lowest fixed rate is now 5.84 per cent for a three-year term with a 20 per cent deposit. This marks a significant reduction as lenders begin adjusting to changing economic conditions.

Canstar data insights director Sally Tindall noted that NAB’s move could be the start of a broader trend.

“NAB is the first of the big four banks to cut fixed rates in 2025, with other banks likely to follow,” she said.

Tindall explained that wholesale fixed rate funding costs have started to ease, and the potential for a cash rate reduction by the RBA should encourage more banks to review their rates.

RBA Poised for a Rate Cut

NAB Economics has predicted that the RBA will cut the cash rate by 25 basis points in February. Alan Oster, NAB’s group chief economist, shared insights into their expectations.

“We now expect the RBA to cut the cash rate by 25 basis points in February,” Oster said.

“We still expect the cutting phase to be gradual, with the RBA taking the cash rate down to 3.1 per cent by February 2026.”

The odds of a rate cut in February 2025 are high. However, the strength of the labour market could delay this until April or May.

This uncertainty around the timing of rate cuts may concern some buyers, but others may choose to act now, expecting property prices to rise once rates are lowered. Historically, buying before interest rates begin to drop has been a good strategy, as home prices tend to lift with increased buyer confidence and borrowing power.

How NAB’s Rates Compare to Other Banks

NAB’s move follows Macquarie Bank, which lowered its fixed rates almost two weeks ago. However, ANZ still holds the lowest fixed rate among the big four banks at 5.74 per cent for both two-year and three-year terms.

Despite these reductions, Tindall noted that fixed rates are still not a popular option for most borrowers.

“While a few banks are now starting to sharpen their offerings, fixed rates still have a way to fall before they become fashionable again with borrowers,” she said.

Many homeowners have been anticipating a cash rate cut for over a year. With the RBA expected to make a move soon, some may choose to hold off rather than locking in a fixed rate.

“That said, there’s no guarantee we’ll see a barrage of cash rate cuts and borrowers should factor this into their thinking.”

What This Means for Borrowers

For those considering a fixed rate, NAB’s decision to cut rates could be a sign of more competitive deals. With the RBA’s first meeting just around the corner, borrowers will be watching closely to see how other banks respond.

Prices are expected to move higher this year as rates fall. The stretched starting point for affordability could result in a more subdued price increase compared to previous easing cycles.

While recent months have seen small price declines, these could be short-lived as lower interest rates improve affordability, boost buyer confidence, and drive renewed demand.

That said, even as affordability improves, the pace of home price growth may not match previous years due to existing affordability challenges. Borrowers should stay informed to make the best decision for their financial situation.