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National Australia Bank cuts discount mortgage rates for new borrowers

This move comes less than two months after NAB said that it would not follow the rest of the Big Four’s decision to hike mortgage rates.

Existing customers will be unaffected, with the old discount still on offer and NAB’s standard variable rate unmoved at 5.24%.

In fact, up to now, NAB is the only one of the Big Four not burdening consumers with an out-of-cycle standard variable rate rise. This decision was in relation to the bank’s goal of building loyalty among customers, as well as acknowledging of the need to regain public trust after the revelations of at the Royal Commission.

NAB initially expressed this intention in September, and this was reiterated by Chief Executive Andrew Thorburn recently.

NAB cuts new customers' mortgage discount

The lender remains the only one of the big four not to impose an out-of-cycle standard variable rate rise on customers, but it will from Friday reduce the discount it is prepared to give new customers from 0.48 to 0.30 percentage points.

The rate on offer to new principal and interest borrowers will rise from 3.69 per cent to 3.87 per cent.

Existing customers will be unaffected, with the old discount still on offer and NAB's standard variable rate unchanged at 5.24 per cent.

NAB said in September it would keep rates on hold in a bid to build loyalty and as an acknowledgement of the need to rebuild trust following revelations of misconduct aired at the royal commission.

Chief executive Andrew Thorburn said that focus had not shifted.

"We value our existing customers," Mr Thorburn said in a statement.

"We've got almost a million home loan customers at NAB, and we're signalling to them that we appreciate your loyalty, we appreciate your business, and we want to keep this rate on hold for as long as we can to acknowledge that."

How are mortgage discount points calculated?

I know they are based on 1% of the loan. However, are the calculated on the base loan or with the closing costs rolled in? For example, your base loan is $320,000 with closing costs of $3,000 that you are rolling into the loan.

If you are using $320,000 toward the home, and rolling $3000 worth of closing costs into the loan, then your loan is $323,000.

All of these calculations are based on the loan value, which is $323,000.