Mortgage moves, policy panic, and a new leading rate: 5.49% p.a.

Phew, what a week. The headline act? President Trump’s tariff blitz – which rattled markets and set the stage for major shifts in Australia’s home loan outlook.

You know what they say: when the US sneezes, the world catches a cold. 

That’s certainly the energy that trade tariffs briefly imposed by US President Donald Trump brought to the table when they went into effect last week.

The ASX 200 – Australia’s benchmark index of top companies – plunged 7.5% in the back half of last week, and has since remained volatile amid continued global uncertainty.

After all, in the wake of the market fallout, Trump walked back his tariffs – announcing a 90-day delay on most measures.

Whether NAB got that memo before unveiling its latest monetary policy forecasts is unclear.

The bank revealed new predictions on Thursday morning and now expects the RBA to cut the cash rate by 50 basis points in May and by 25 basis points in July, August, November, and February.

It also made a splash on Friday morning, slashing fixed rates by as much as 55 basis points.

Meanwhile, the ASX RBA Rate Indicator showed over 75% of traders pricing in a cut to 3.35% in May – a full 75 basis points below the current 4.10%.

That seems unlikely, and appears to be the only source suggesting such a cut.

However, it’s worth noting that treasurer Jim Chalmers and RBA governor Michele Bullock reportedly came together for an emergency meeting on Thursday morning.

While whispers of a pandemic-style emergency cut may seem premature, the market appears to be pricing in the possibility – or at least bracing for a highly reactive RBA come May.

And now you’ve indulged me in my analysis, let’s dive into all that happened on the home loan market this week:

New leading variable rate unveiled: 5.49% p.a.

While we were all watching the US, an often-overlooked mutual bank launched into pole position, offering a variable rate below 5.50% p.a.

First Option Bank appears to have cut its Simple Home Loan product to a two-year discounted rate of 5.49% p.a. (5.69% p.a. comparison rate*) for owner-occupiers with loan-to-value ratios (LVRs) of 60% or less.

The special represents a 25 basis point discount on the product’s advertised rate and it’s available to a limited number of external refinancers with loans worth at least $300,000.

If you’re refinancing an investment home loan or your LVR is higher than 60%, you might want to check out these other special rates:

New special rates have also been unveiled on the bank’s Complete Home Loan product, which provides a 100% offset account and a fee-free credit card at the cost of a $375 annual fee.

Special rates on the packaged product for eligible customers are as follows:

NAB cuts fixed rates to as low as 5.39% p.a. 

Just as the dust was settling on its bold new RBA prediction, NAB swooped in with another headline move – slashing fixed home loan rates by up to 55 basis points for both owner-occupiers and investors.

Rates now start from 5.39% p.a., placing the big four bank in rare territory among the market’s most competitive lenders.

As is usually the case, the sharpest rates are reserved for borrowers with LVRs below 70%, with the three-year fixed term offering the lowest rate on the table.

That said, borrowers fixing today – just as the RBA potentially gears up for a string of cuts – could find themselves locked into a higher rate than many variable borrowers may enjoy in the months ahead.

Check out our previous coverage to learn more about NAB’s latest cuts.

CommBank shifts serviceability gears for HELP debt holders

In other home loan news, CommBank responded to a call made by Dr Chalmers for APRA to change how HECS-HELP debts are treated in mortgage serviceability tests.

The biggest of the big four revealed it would be doing exactly as Dr Chalmers suggested – ignoring student debts due to be paid off in the coming 12 months from serviceability and debt-to-income ratio testing.

It also went one step further.

It will apply a reduced serviceability buffer of just 1% for borrowers whose HECS-HELP repayments are due within one to five years – compared to the standard 3% buffer mandated by APRA.

Other movers

• Suncorp Bank hiked variable rates by as much as 2 basis points 
• BCU Bank dropped one, two, and three-year fixed rates by as much as 80 basis points to as low as 5.49% p.a. for owner-occupiers
• P&N Bank lowered fixed rates for investors by as much as 75 basis points to as low as 5.74% p.a.
• BankVic slashed rates on select investment home loans by up to 21 basis points to as low as 6.03% p.a.

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_{Image by Francisco Anzola on Wikimedia Commons}