One of the major banks broke ranks this week, reducing interest rates on variable home loans despite the Reserve Bank of Australia (RBA) keeping the official cash rate steady.
And it wasn’t just a token reduction.
NAB slashed 40 basis points off its basic variable loan rate, bringing it down to 6.44%. This could save the average borrower hundreds of dollars per month.
For context, a standard rate cut by the RBA is 25 basis points, making NAB’s move equivalent to nearly two cuts. This is particularly noteworthy given that banks often pass on RBA rate hikes in full but are known to hesitate when it comes to fully passing on rate cuts.
Typically, when the RBA announces a rate cut, the big banks engage in a game of chicken—waiting to see which one will move first and by how much. It’s common to see a cautious announcement like, “We’ll cut by 15 basis points,” followed by others reluctantly following suit with similarly modest reductions.
NAB’s bold decision has turned heads. But on closer inspection, the move was less groundbreaking than it first appeared.
The other big banks were already offering lower rates. ANZ’s best variable rate stands at 6.14%, while CBA offers 6.15%. Westpac was already at 6.44%, meaning NAB has essentially just aligned itself with the competition.
Lower Rates exist beyond the 'Big Four'.
While NAB’s move may benefit some borrowers, for many Australians, it doesn’t matter what the big four banks do. They’re banking elsewhere.
Research reveals 38 lenders currently offering at least one variable rate below 6%. For example,those offering between 5.89% and 5.94% can mean a saving of at least $4500 annually.
Why Switching Lenders Could Save You Thousands
Borrowers with these smaller lenders are effectively enjoying the equivalent of a quadruple rate cut compared to NAB’s recent reduction. And with economists predicting further rate cuts next year, switching to a non-major lender could amplify your savings.
For example, a borrower who makes the switch now could end up saving around $10,000 annually if rates are slashed further in 2024.
The message is clear: While NAB’s rate cut may make headlines, savvy borrowers who shop around and refinance with non-major lenders could save far more.
Source: "Refinance to a Non-Major Lender to Save Thousands on Home Loans." NEWS.COM