SYDNEY, May 30 (Reuters) - National Australia Bank, the country’s fourth-largest lender, on Thursday raced to offer discounts on some of its fixed-rate mortgages in anticipation of a rate cut by the central bank next week.
With unemployment ticking higher and low economic and credit growth, economists are widely expecting the Reserve Bank of Australia to cut the benchmark rate from its record low 1.50% for the first time in almost three years.
NAB will cut 20 basis points from its 2-year fixed rate loans for home owner occupiers with immediate effect, and offer a special rate for first home buyers of 3.49%, down from 3.69%, the lender said in an emailed statement.
The offers are not available to property investors.
The country’s “Big Four” banks, who control about 80 percent of the mortgage market, have all recently cut fixed rates as a cheaper way to lure new borrowers than cutting variable rates, a move that would hurt their profits because they are a much bigger part of their mortgage book.
“The fact that NAB, a Big Four bank, is offering one of the lowest fixed rates in Australia is a sign of the times,” Sally Tindall, a director at loan broker RateCity said in a statement.
“The big banks are now playing in the low cost loan space in a bid for new customers.”
Australia’s major lenders are competing to win back the market’s trust after suffering significant reputational damage over the past year in the fallout of a landmark misconduct inquiry. They will be under pressure to lower variable rates if the central bank cut rates next week, as widely expected.
They have been experiencing sluggish below-market mortgage growth rates, with all except for Commonwealth Bank of Australia , losing market share in their key domestic home loan market to smaller banks and non-bank lenders.
Fixed rates are often used by borrowers to lock-in a price for a portion of their mortgage. Fixed-rate loan products represent about 20% of banks’ home loan inflows, according to analysts.
Even as the central bank has kept its policy rate at a record low of 1.5% since August 2016, banks’ funding costs have already fallen sharply in recent months. The average Australian mortgage rate is about 4.2%, according to the RBA. (Reporting by Paulina Duran; Editing by Jacqueline Wong)