Australia’s big banks have started to reduce fixed rates in a sure sign they feel more confident the Reserve Bank of Australia could soon move on official interest rates. The first to move was Macquarie Bank in mid-January and this week the NAB has followed suit. NAB Economist Alan Oster is tipping that the RBA will make a 25 basis point cut when it meets in mid-February.

This follows a drop in underlying inflation from 3.5% to 3.2% in the December quarter. The RBA has long said it wants inflation to be within 2% to 3%, so while the pace of inflation growth is slowing, it still sits beyond that target range. The Commonwealth Bank, ANZ and Westpac are all now predicting a February rate cut. The cash rate has been 4.35% since November 2023.

According to Canstar, a 25 basis points drop would reduce mortgage repayments on a $600,000 loan by $92 a week. Canstar data insights director Sally Tindall, predicts the other big banks will soon start cutting their fixed rates. “The cost of wholesale fixed rate funding has started to ease slightly. This, combined with a prospective cash rate cut, should push other banks into moving on fixed rates,” she says.