National Australia Bank has cut interest rates on fixed term home loans ahead of an expected rate reduction from the Reserve Bank next week.
Starting Monday, a one-year introductory home loan will come with a fixed rate of 4.99%, down from 5.99%, the bank said. Three-year introductory home loans will cost 5.89% from 6.89%.
"They must be pretty confident the RBA is going to lower the interest rate," said Petter Ingemarsson of business analysis firm Datamonitor. "Just because the market expects it, doesn't mean it's going to happen."
The RBA is widely expected to reduce the overnight cash rate target by at least a full point when it meets next Tuesday. Investors put the chances of a 1.25% cut at 83%.
Commercials banks have been moving their interest rates down in conjunction with the central bank's action.
Since September, the RBA has lopped 2 percentage points from the cash rate, bringing the official rate to 5.25% in an effort to boost consumer spending and woo buyers back into the housing market.
"This year has been extremely volatile, so we are pleased to see some relief in our fixed rate cost of funds," said NAB's executive director and CEO for Australia, Ahmed Fahour, in a statement.
"Once global wholesale and money markets settle down and further reductions are made to the official cash rate, we hope to be in a position to pass on further rate cuts."
Mr Ingemarsson said the move by NAB could also be an effort to price themselves more aggressively than their competitors and win more market share.
czappone@fairfax.com.au
BusinessDay
