Rate tracking by comparison site Canstar shows NAB dropped fixed rates by up to 0.25 percentage points for owner-occupiers and up to 0.3 percentage points for investors on Monday.
The cuts would save an average new borrower $1285 in interest payments on a one-year fixed loan or $1929 for a two-year fixed loan, compared to if they had taken out the lowest rates previously advertised by NAB.
Financial markets think there's a very strong chance Governor Michele Bullock will announce a cut. (Bianca De Marchi/AAP PHOTOS)
The move is likely to spur competition from other banks to start cutting rates as lenders try to entice customers to fixed mortgages, given the latest data shows more than 97 per cent of new loans were variable, Canstar data insights director Sally Tindall says.
"We'd hope to see competition really ramp up in that space as we get towards a cash rate cut, and then potentially onto the next one," she told AAP.
Wholesale funding is already starting to ease slightly and traders are pricing in a 95 per cent chance the central bank will slash the cash rate by 25 basis points on February 18, after its next two-day policy meeting.
Macquarie was the first lender to cut fixed-rate mortgages in 2025, reducing its one-to three-year fixed-rate mortgages by up to 0.16 percentage points in January.
Ms Tindall expects competition for variable rate mortgages to heat up once the Reserve Bank has delivered its first cuts.
"We expect the big four banks in particular to pass on cash rate cuts in full, at least for the first couple of cash rate cuts," she said.
The conditions in which a rate cut might happen this year are different from almost five years ago. (Con Chronis/AAP PHOTOS)
NAB's cuts bring it into line with Westpac, offering the lowest one-year fixed rate amongst the big four banks at 6.09 per cent.
ANZ is still offering the lowest two- and three-year fixed rates, both at 5.74 per cent.
Despite the reduction in fixed rates, the preference for most borrowers remains variable rate mortgages, given the outlook for up to as many as five interest rate cuts this year, if the most optimistic predictions of NAB economists come to fruition.
But other economists, including those at ANZ, have predicted as few as two cuts.
The depth of the RBA's cutting cycle could determine whether variable or fixed rates are more suited to borrowers.
Meanwhile, retail spending edged down 0.1 per cent in December, the Australian Bureau of Statistics reported on Monday.
But that was stronger than consensus expectations of a 0.7 per cent slump, given the November figures were boosted by Black Friday sales.
"Cyber Monday fell in early December and boosted spending to begin the month, particularly on discretionary items like furniture, homewares, electronics and electrical items," Robert Ewing, ABS head of business statistics— Australian Bureau of Statistics (@ABSStats) For more, see https://t.co/LvzDVRE8i0 pic.twitter.com/QhCWKkJP2wFebruary 3, 2025
Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia, said there were signs consumer spending and the broader economy were gaining momentum.
"If the RBA are still concerned about underlying inflation pressures, these data could be read as a sign the economy does not need immediate support in the form of a February rate cut," he said.
But ANZ bank economists Madeline Dunk and Jack Chambers still believe it won't be enough to deter the Reserve Bank from lowering rates.
Retail spending lifted one per cent over the December quarter, also above consensus forecasts, adding 0.2 percentage points to GDP growth over the last three months of the year, CBA senior economist Belinda Allen said.
