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NAB cuts home loan interest rates in ‘strategic’ move

NAB has followed CBA in changing its home loan pricing to better reflect what borrowers are actually paying.

NAB has cut interest rates on its discounted variable home loan. But an expert says borrowers shouldn’t get too excited by the move.

The major Australian bank dropped interest rates on its Tailored Home Loan today by up to 1 per cent. The change means the advertised variable rate is now 6.79 per cent for owner-occupiers and 7.09 per cent for investors.

RateCity research director Sally Tindall said this was a “strategic move” by NAB to better reflect the actual rate customers end up receiving, rather than a “whopping great rate cut”.

NAB sign
NAB has cut interest rates by up to 1 per cent on its Tailored Home Loan today.

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Advertised rates higher than what customers pay

According to RateCity, the Big Four banks purposefully advertise higher rates on their package loans (ones with offset accounts) than what customers end up getting.

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Reserve Bank data shows new customers applying for a variable rate with one of the Big Four banks are currently offered an average rate of 6.28 per cent. However, all of the major banks advertise higher rates than this.

Commonwealth Bank, for example, has a lowest advertised variable rate of 6.49 per cent, while Westpac's is 7.44 per cent and ANZ's is 7.24 per cent.

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“While advertising high rates might seem like an odd strategy, it’s a marketing tool the big banks have been employing for years,” Tindall said.

“They do this so that customers walk away feeling like they have won Lotto by being offered a special discount.

“However, a borrower looking for a competitive deal should focus on the rate they’re paying — not the discount being offered.”

‘Pressure’ on Westpac, ANZ to follow

Commonwealth Bank (CBA) made a similar move in November, 2022. While CBA and NAB lowest advertised rates are still higher than the RBA average, Westpac and ANZ are considerably higher again.

“This move by NAB puts pressure on Westpac and ANZ to review their advertised rates, particularly in relation to their mortgages with offset accounts,” Tindall said.

“Both banks are currently advertising owner-occupier variable rates that start with a 7, when the reality is most new customers are getting sizeable discounts.”

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