Big banks battle for borrowers: NAB removes tiers, Westpac offers lower fixed rates
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It appears that NAB, one of Australia's largest banks, has made a surprising move that could significantly impact mortgage rates.
The bank has decided to streamline its rate system for its basic variable loan, which previously required customers to pay varying rates based on the size of their deposits.
Now, all customers with this mortgage will pay the same rate: 6.49 per cent.
This is excellent news for those with a deposit of less than 20 per cent, as the new rate is 0.70 percentage points lower than the previous 7.19 per cent they had to pay.
'This is an unusual move from Australia's third-largest home loan lender,' said RateCity Research Director Sally Tindall.
'For years, banks have been moving to a risk-based pricing system where borrowers with small deposits are slugged with higher rates.'
'NAB is opening the door specifically to owner-occupiers with small deposits, who are often first home buyers madly searching for options to get a foot in the market,' she added.
Another major Australian bank, Westpac, has also made a few changes recently, and these could directly impact your financial situation, particularly if you're an investor or in the market for your first home.
Westpac recently informed its customers through an email that it has lowered its two-year fixed rates for Investment Property Loans. In addition, the bank has raised rates for its Flexi First Home Loan by 0.10 percentage points, leading to a reduction in the two-year introductory discount and promotional discount.
Now, for customers with a deposit exceeding 30 per cent, the new rate is set at 6.09 per cent for the initial two years before increasing to 6.49 per cent. If you have a 20 per cent deposit, you'll be paying 6.19 per cent interest for the first two years before it climbs to 6.19 per cent.
While these changes don't affect the base loan rate, this seemingly minor adjustment has led to a scenario where none of the big four banks offers mortgage holders a loan with an interest rate below six per cent.
RateCity's Sally Tindall described Westpac's move as a 'strategic move to walk away from the cutthroat competition in the home loan market'.
'This move by Westpac shuts the door on advertised variable rates under 6 per cent from the big four banks,' she said.
'It's unlikely we'll see an advertised variable rate from a big four bank under 6 per cent until the RBA starts cutting the cash rate.'
She also highlighted the contrast between the two changes. While Westpac is 'swimming with the tide' by hiking its basic variable loan, NAB is 'going against it' by cutting this rate for owner-occupiers with small deposits.
While the big four banks typically dominate the home loan market, it's worth acknowledging the presence of numerous smaller banks and credit unions that offer competitive interest rates and flexible terms.
If you're in the market for a new loan, whether it's for a home, a car, or any other purpose, conducting thorough research is essential. The big four may not always be your best option. One of the smaller banks or credit unions could pleasantly surprise you with an attractive offer, putting more money in your pocket each month.
Of course, before taking the plunge, make sure to carefully examine the fine print and assess the fees and interest rates you'll be incurring.
We'd love to hear your thoughts on these changes, members! Please share them in the comments below.
The bank has decided to streamline its rate system for its basic variable loan, which previously required customers to pay varying rates based on the size of their deposits.
Now, all customers with this mortgage will pay the same rate: 6.49 per cent.
This is excellent news for those with a deposit of less than 20 per cent, as the new rate is 0.70 percentage points lower than the previous 7.19 per cent they had to pay.
NAB scraps interest rate tiers for some loans, while Westpac decreases fixed rates. Credit: Shutterstock.
'This is an unusual move from Australia's third-largest home loan lender,' said RateCity Research Director Sally Tindall.
'For years, banks have been moving to a risk-based pricing system where borrowers with small deposits are slugged with higher rates.'
'NAB is opening the door specifically to owner-occupiers with small deposits, who are often first home buyers madly searching for options to get a foot in the market,' she added.
Another major Australian bank, Westpac, has also made a few changes recently, and these could directly impact your financial situation, particularly if you're an investor or in the market for your first home.
Westpac recently informed its customers through an email that it has lowered its two-year fixed rates for Investment Property Loans. In addition, the bank has raised rates for its Flexi First Home Loan by 0.10 percentage points, leading to a reduction in the two-year introductory discount and promotional discount.
Now, for customers with a deposit exceeding 30 per cent, the new rate is set at 6.09 per cent for the initial two years before increasing to 6.49 per cent. If you have a 20 per cent deposit, you'll be paying 6.19 per cent interest for the first two years before it climbs to 6.19 per cent.
While these changes don't affect the base loan rate, this seemingly minor adjustment has led to a scenario where none of the big four banks offers mortgage holders a loan with an interest rate below six per cent.
RateCity's Sally Tindall described Westpac's move as a 'strategic move to walk away from the cutthroat competition in the home loan market'.
'This move by Westpac shuts the door on advertised variable rates under 6 per cent from the big four banks,' she said.
'It's unlikely we'll see an advertised variable rate from a big four bank under 6 per cent until the RBA starts cutting the cash rate.'
She also highlighted the contrast between the two changes. While Westpac is 'swimming with the tide' by hiking its basic variable loan, NAB is 'going against it' by cutting this rate for owner-occupiers with small deposits.
While the big four banks typically dominate the home loan market, it's worth acknowledging the presence of numerous smaller banks and credit unions that offer competitive interest rates and flexible terms.
If you're in the market for a new loan, whether it's for a home, a car, or any other purpose, conducting thorough research is essential. The big four may not always be your best option. One of the smaller banks or credit unions could pleasantly surprise you with an attractive offer, putting more money in your pocket each month.
Of course, before taking the plunge, make sure to carefully examine the fine print and assess the fees and interest rates you'll be incurring.
We'd love to hear your thoughts on these changes, members! Please share them in the comments below.
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