National Australia Bank is the first of the big four banks to cut its interest rates, passing on 20 basis points of the central bank's 25 basis point cut.
NAB will reduce its standard variable home loan rate to 6.38 per cent from December 10, from 6.58 per cent before the cut, while rates on variable business loans will also be cut by 20 basis points.
Personal banking executive Lisa Gray said the bank's cost of funding was still high.
"The impact of deposit and wholesale funding costs remain high, resulting from instability in the global economy and low confidence domestically," she said in a statement.
NAB has promised to offer the lowest standard variable home loan rate of the big four banks until the end of 2012.
Commonwealth Bank and ANZ would now have to cut their rates by at least 23 basis points to offer a lower standard variable rate than NAB.