National Australia Bank (ASX: NAB) yesterday announced to continue to price home loans at a discount to the other major lenders, as part of its strategy to expand its share of the mortgage market.

By effectively ruling out a near-term rise in its mortgage rates, the bank now pressures its rivals also to hold steady, even as the cost of funding loans eats into profits.

NAB chief executive Cameron Clyne yesterday gave the strongest indication yet that the Melbourne-based bank was prepared to avoid out-of-cycle rate increases, acknowledging that it needed some ''flexibility'' in pricing mortgages as wholesale borrowing costs heightened.

''I can say that while we watch these closely, we don't have any immediate plans to change our current settings,'' he said.

Posting $1.1 billion cash earnings in the three months to June, a 22 per cent increase on its profit from the same period last year, NAB's boss announced he is pleased with the momentum his company is achieving.

"By maintaining a competitive proposition, we think that it is the right thing for the business as well as our customers.''

But even with NAB's strategy to have the lowest-cost mortgages among the four majors, some investors say they have little choice but to join Commonwealth Bank or Westpac to push an out-of-cycle interest increase in the months after the election to shield profit margins.

At present NAB offers a standard variable mortgage rate of 7.24 per cent. Other big lenders CBA, ANZ and Westpac have 7.36, 7.41 and 7.51 per cent, respectively.