Reprice just a strategic move to better reflect the actual rate customers end up receiving, says expert
NAB, Australia’s third largest bank, has reduced the advertised rates on its discounted variable home loans – a move that aligns with the recent trend among major banks to more accurately represent the actual rates that customers receive.
According to Reserve Bank of Australia (RBA) data, the average interest rate offered to new customers by the big four banks for variable rate mortgages currently stands at 6.28%. Despite this, the big four — NAB, CBA, Westpac, and ANZ — traditionally advertise higher rates for their package loans, which include features like offset accounts, allowing them to provide significant personalised discounts off these higher posted rates.
RateCity said this practice has been typical among major banks as a marketing strategy, despite the oddity of advertising higher rates than those typically charged, as the strategy aims to make customers feel they are receiving a significant discount.
In a similar move, the Commonwealth Bank of Australia (CBA) adjusted its advertised rates in November 2022 to better reflect the rates customers were actually receiving. Following CBA’s steps, NAB’s recent adjustments also seek to present a more transparent pricing structure, although their lowest advertised rates remain above the RBA’s average.
“Potential new borrowers should not get too excited about NAB’s changes,” said Sally Tindall (pictured), research director at RateCity.com.au. “This should not be considered a whopping great rate cut, but rather a strategic move by the bank to better reflect the actual rate customers end up receiving.
“This change from NAB takes us one step closer to removing the cloak of secrecy around the interest rates big four bank customers actually receive. While advertising high rates might seem like an odd strategy, it’s a marketing tool the big banks have been employing for years.
“There aren’t many industries where the market-leaders purposely advertise prices that are higher than what the customer actually pays, but the mortgage industry is one of them. They do this so that customers walk away feeling like they have won lotto by being offered a special discount.”
Tindall said this shift in NAB’s strategy places pressure on other major banks to reevaluate their advertised rates, especially for loans that include offset accounts.
“Both Westpac and ANZ are currently advertising owner-occupier variable rates that start with a seven, when the reality is most new customers are getting sizeable discounts,” she said. “We know from the RBA the average variable rate for new customers with a big four bank is 6.28%. As an average, this means there’s plenty of borrowers qualifying [for] even lower rates.”
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