Housing
NAB is the first of the big four banks to cut the fixed-term interest rates, this year. Pixabay

The National Australia Bank (NAB), the third-largest home loan lender in the country, has slashed its three-year fixed rate on home loans by 0.60%, bringing it down to 5.99%.

NAB cut the rate for owner-occupiers paying principal and interest, which could ease customers worried about a potential cash rate rise. However, borrowers have to own a minimum of 30% of their property for the loan-to-value ratio of 70% or lower, News.com reported.

NAB became the first of the big four banks this year to cut the fixed-term interest rates.

According to Sally Tindall, the research director of RateCity, "This is a strategic move from NAB in a bid to test whether there's any appetite among borrowers to revert back to fixing. A big bank fixed rate that starts with a '5' is likely to turn at least a few heads, particularly among those worried about the prospect of further cash rate hikes."

Though the official rate cut is unlikely to be lowered for a few more months, the recent inflation figures may have led to an increase. But, NAB's move to drop the interest rate indicates the Reserve Bank of Australia (RBA) may lower the rate and not raise it.

The cash rate fixed by the RBA serves as a standard for interest rates across the economy.

Initially, NAB's economic team had expected the cash rate to be slashed in November this year, but has now stated that the drop is likely to happen before May 2025, RateCity reported.

"NAB's decision to slash their three-year fixed rate by 60 basis points suggests they anticipate a significant drop in the cash rate over the next few years," Mozo finance expert Rachel Wastell said. "This aggressive rate cut by NAB could be a response to ANZ's acquisition of Suncorp, and is a clear bid to lure customers by betting on future cash rate reductions. Borrowers considering longer-term fixed rates should be cautious. When the cash rate eventually drops, those on fixed rates might end up paying more than those on variable rates. Remember, banks are experts at predicting cash rate movements, so locking in a rate is essentially a bet against the house."

NAB's rival lenders -- Commonwealth Bank, Westpac and ANZ -- offer three-year fixed rates at 6.59%. For five-year products, CBA and Westpac offer loans at 6.69%, while NAB offers 6.79% and ANZ offers 6.84%.