On February 3, 2025, NAB became the first of the big four banks to cut fixed-interest mortgage rates, reducing them by up to 0.25 percentage points for owner-occupiers and up to 0.30 percentage points for investors.

NAB's new lowest fixed rate for owner-occupiers is now 5.84% for a three-year term, contingent on a deposit of at least 20%.

This marks the first significant adjustment since the last fixed rate changes by the big four on October 28, 2024, when ANZ had the lowest fixed rate at 5.74%.

Canstar's data insights director, Sally Tindal, anticipates that NAB's rate cuts will prompt other banks to follow suit, especially as wholesale funding costs ease.

NAB's chief economist, Alan Oster, supports the rate cut decision, forecasting a 25 basis point reduction in the cash rate in February, bolstered by recent data indicating moderated inflation.

Traders are predicting a 95% chance that the Reserve Bank will lower the official cash rate from 4.35% to 4.10% during its upcoming meeting on February 17-18, 2025.

Despite these fixed rate reductions, most borrowers still prefer variable rate mortgages, driven by expectations of multiple rate cuts this year, although some analysts are forecasting only two.

The effectiveness of the Reserve Bank's cutting cycle will significantly influence whether fixed or variable rates become more advantageous for borrowers.

Tindall predicts that increased competition for variable rate mortgages will arise once the Reserve Bank implements its initial rate cuts, with expectations that the big four banks will fully pass on these cuts.

In contrast to the previous rate cut cycle during the COVID-19 pandemic, where no major bank passed on cuts to existing variable rate customers, the current environment sees borrowers eagerly anticipating the first cash rate cut.

Canstar highlights competitive rates outside of major banks, such as SWSbank’s offering of 4.99% for a three-year fixed term for loans of $800,000 or more.

Retail spending decreased by 0.1% in December 2024, but this was viewed as a stronger-than-expected outcome following the Black Friday sales boost in November, according to the Australian Bureau of Statistics.