National Australia Bank’s big move on variable interest rate, but there’s a catch for existing mortgage holders

NAB has announced changes to advertised interest rates for its base variable home loan as competition in the loans space heats up. The rates on NAB’s base variable loan for owner-occupiers and investors paying principal and interest have fallen by 0.40 percentage points, while interest-only rates on this loan dropped by 0.60 percentage points. For new owner-occupiers paying principle and interest, the rates have fallen from 6.84 per cent to 6.44 per cent. Interest-only loans for owner-occupiers have fallen to 7.34 per cent. Canstar.com.au data insights director Sally Tindall said since August the number of lenders cutting new customer variable rates had far outweighed the number of lenders hiking these rates. “NAB’s home loan book has been sluggish, particularly in light of the recent gains made by CBA and ANZ. This move should help the bank reverse this,” she said. The bank’s standard variable rate remains unchanged for existing customers. “Existing NAB borrowers could find today’s news frustrating, as these rate cuts are only on offer for new customers,” Ms Tindall said. “However, if you’re an existing customer, there’s absolutely nothing stopping you from picking up the phone and asking for a rate cut.” Despite the cuts, NAB does not have the lowest advertised variable rate out of the big four. ANZ and CBA offer lower rates on their digital-only home loans that were introduced in November 2023 and May 2024, respectively. While NAB’s rates have fallen, Canstar says there are 38 lenders offering a mortgage with a variable rate of less than 6 per cent. The fall in rates comes as NAB announced its full-year results. NAB said its net interest margin, a key indicator of profitability that measures how much money a bank makes from lending compared with its borrowing costs, decreased 3 basis points to 1.71 per cent. “This primarily reflects home lending competition, higher term-deposit costs and deposit mix impacts, partially offset by higher earnings on deposits and capital as a result of the higher interest rate environment,” NAB said. The bank delivered $6.96bn in profits across the year, a 6.1 per cent fall from last year, and chief executive Andrew Irvine said its “asset quality” had “deteriorated”, as pressures piled up on its customer base. “The Australian economy has remained resilient; however, the impact of higher interest rates and cost of living is challenging for our customers and we are here to help them,” he said on Thursday morning. “Not unsurprisingly, asset quality deteriorated over FY24 but we have maintained prudent balance sheet setting.”