NAB has reverted to its interest rate projection of a first decrease in May 2025.

At the end of September, the big bank shifted its rate reduction call to February 2025, citing a better “balance of risks around the inflation outlook”.

The main four banks have subsequently changed their view, citing a stronger-than-expected job market and limited evidence available to the Reserve Bank of Australia (RBA) before its 18 February rate decrease decision.

Only two more employment reports and one quarterly CPI are expected before the February central bank meeting.

According to NAB Economics, the RBA may feel “little urgency to adjust policy settings while both inflation and unemployment are evolving gradually”.

The major four banks anticipate a “steady profile” of one-quarter drop, returning to 3.10 percent by mid-2026, after a first cut in May 2024.

Rate call up to February for the first time on September 30. We did it because we thought a more favourable inflation forecast would make a rate drop more likely in the near future, the bank added.

By the robustness of employment market indicators, even if Q3 CPI data was predictable. Consistent with the RBA’s November projection track, we continue to believe that the unemployment rate will see a little increase before settling at around 4.25% in the middle of 2025.

Majors take front stage

NAB is the first large bank to announce an interest rate drop, and borrowers will undoubtedly be curious to see whether the other big four follow suit.

Still foresee the first rate decrease in February 2025, with risks biassed towards a later easing cycle.

While the employment market is resilient, the very little weakening this month and the lower-than-expected wage result yesterday may help the RBA remove the cash rate’s restrictiveness.

Westpac’s economic spokesman said in early November that the RBA’s December board meeting may be too soon for a rate drop.

But by February, we expect the RBA will have seen enough to be satisfied that inflation is dropping and will stay in the target zone on its present track.

“The RBA will likely need a higher unemployment rate from 4.1 percent and trimmed mean CPI moderation to cut rates in February.

NAB reduces the basic variable rate during the cycle.

The base variable rate home loan of the main bank was also reduced by 40 basis points (bps) to 6.4 percent per annum last week.

This reduction was the initial adjustment to NAB’s base variable rate this year, following a 25 basis point increase in November of last year.

NAB’s response to the intensifying competition among the Big Four banks, two of which are offering low-rate digital-only home loan options for consumers, could be this considerable, out-of-cycle reduction.

“NAB’s new low rate is also available to borrowers with a maximum loan-to-value ratio (LVR) of 95%, ensuring that even those with a very low deposit can take advantage.”

“[Last week’s] reductions appear to be a strategic move by NAB, as they enable it to remain competitive with the digital-only offers introduced by CommBank and ANZ Plus, while still providing borrowers with the convenience of in-person service.”

What NAB’s New Rates Mean for Your Home Loan and Your Future Money”

Changes are happening in interest rates, and NAB is leading the way in lowering them. What does this mean for your car loan, investments, or overall money plan, though? Depending on what you do now, these changes could bring you big chances or problems.

At ASK Financials, we know how to turn changes in the market into real benefits for you. We can help you whether you’re buying a home for the first time, investing, or refinancing.

• Knowing how changes in interest rates affect the amount you pay back on your loan.
• Finding the best loan choices in a market with lots of them.
• Make a plan just for you to save more money and reach your goals faster.

Let’s talk! Call us right away to make the best business decisions.To set up a meeting with one of our experts, click here.The rates are changing quickly, so don’t miss your chance!