* CBA cuts 5-year fixed home loans to lowest ever
* NAB cuts home loan rates to lowest in 20 years
* Move driven by falling funding costs for banks
By Swati Pandey
SYDNEY, July 23 Two of Australia's biggest banks cut their fixed-rate home loans on Wednesday in a move analysts said reflected lower borrowing costs and expectations that the Reserve Bank of Australia will keep rates at record lows.
Commonwealth Bank of Australia, the country's biggest lender by market value, said it will offer a 5-year fixed-rate home loan at 4.99 percent, its lowest ever.
National Australia Bank quickly matched the rate, its lowest in 20 years, cutting its 5-year rate by as much as 70 basis points, effective Friday. NAB has also cut three and four year fixed rates, it said.
Other banks are also expected to follow suit.
The move was driven by lower borrowing costs for banks and was unlikely to drive near record-low lending margins down further, analysts said.
Australia's five-year swap rate, an indicator of long-term funding cost for banks, last week hit its lowest since late 2012. It has fallen nearly 60 basis points since April. Its mid-value was 3.1375 percent at around 0700 GMT.
"The ability of banks to raise funds cheaply is improving and that means they can pass it on to borrowers," said David Sportswood, banking analyst with Shaw Stockbroking.
Australia's residential property market has been enjoying rising prices and a revival in activity after a period of stagnation, thanks largely to record-low interest rates.
The Reserve Bank of Australia has kept rates steady at a 2.5 percent after last easing in August 2013. Most economists expect rates to remain on hold for at least the rest of the year.
Mortgage lending is the biggest asset class and profit contributor for Australia's "Big Four" banks - CBA, NAB, Westpac and Australia and New Zealand Banking Group.
Together, the four write as much as 90 percent of the nation's home loans.
A government-backed review of the country's financial system last week said an increase in Australian housing debt since 1997 and banks' concentrated exposure to mortgages was a significant source of systemic risk.
The review invited submissions on whether the big banks should set aside more capital against mortgages and sought further information on measures to mitigate risks to the financial system and the economy from the housing market. (Editing by Eric Meijer)