NAB hikes fixed rates on home loans–again

NAB is the latest bank to make changes across its range of fixed rate home loans, lifting rates by as many as 50 basis points. 

This marks the second rate-hike from NAB this year – but they’re far from the only offenders. Banks have been urgently pushing fixed rates back up to pre-pandemic levels in light of growing speculation the RBA may soon raise the cash rate.  

The table below shows the new fixed rates on the NAB Tailored Home Loan (Choice Package) for owner occupiers making P&I repayments:

NAB Tailored Home Loan Choice Package — 9 March 2022

These rates now represent NAB’s most affordable fixed-rate option. 

At the same time, NAB has also cut its variable interest home loans. Their Base Variable Rate Home Loan for owner occupiers with an LVR below 80% is now down 10bp to 2.19% p.a. (2.23% p.a. comparison rate*). 

During the last few months of soaring fixed-rates, banks have used variable rate drops as part of their playbook to reel in customers.

As a result, for prospective home buyers the current low variable rates look like the more enticing offer. However, with the RBA poised to drive up the cash rate in the near future, fixed-rate home loans might be the cheapest option in the long run.

Why are fixed-rates going up?

There are a couple reasons why Australian banks have been upping their fixed rates lately.

Firstly, the RBA looms large with impending changes to the cash rate, which many Australian economists reckon could jump a few times by the end of the year to offset inflation. Raising the cash rate is not an absolute guarantee that variable interest rates will rise, too, but banks may be adjusting their funding models accordingly.

Secondly, the RBA’s term funding facility – which made a large sum available to banks at a low capped rate – was retired in June 2021. Banks had drawn down more than they needed, so that lasted beyond the facility’s expiration date. As such, they have kept their own rates low until now to entice customers.

Finally, economic inflation in other countries (especially the US) has put enormous pressure on Australian banks who get part of their funding from overseas. Since banks have to pay more on their own funds now, they’re hiking rates on customers to compensate. 

All things up, fixed-rates will likely become even more expensive in the coming months. But with variable rates poised to overtake them by 2023, now may be a great time to jump at the opportunity.

If you’re considering buying a home, head over to our fixed rate comparison tool to get started. 

We’ve also rounded up the property trends to watch out for in 2022, as well as a new guide to off-market buying for those seeking a competitive edge.