NAB is first big bank to cut interest rates

NATIONAL Australia Bank is the first of the major banks to break ranks and cut interest rates - even if it passed on only 0.2 per cent of the cut to customers.

The bank blamed higher deposit rates and elevated wholesale funding costs for holding back 5 basis points of the Reserve Bank's 0.25 percentage point cut yesterday.

NAB pledged to remain the lowest of the big four banks with its standard variable rate dropping to 6.38 per cent.

The rate cut will save customers up to $50 per month in interest on the average $300,000 home loan.

Group executive personal banking Lisa Gray said the decision was not taken lightly but the bank had to strike the right balance between costs of funding and a competitive offering for customers.