For owner-occupiers, NAB kept its five-year fixed rate steady at 4.59 per cent and reduced by 10 basis points the fixed rate on a 12-month loan to 3.89 per cent, which it says is the lowest ever one-year fixed rate it has offered.

NAB also said applications for fixed rate loans as a share of total applications had "more than doubled" in December compared to September.

Yield curve steepens

NAB chief operating officer Antony Cahill said the rate rises are "a reflection on what is happening on the yield curve further out". When borrowers take out fixed-rate loans, banks finance them from capital markets.

"The cost of funds for fixed-rate lending in international and domestic capital markets on those longer terms is certainly going up ... The world is starting to think about inflation and the costs of funds are going up.

NAB chief operating officer Antony Cahill said use of chatbots would become more widespread. Edwina Pickles

"There is an expectation from bondholders around inflation and hence what those bondholders are seeking in terms of a return – they are effectively saying we want to receive a higher return than they have previously."

The yield on the three-year US government bonds rose from 0.85 per cent at the end of September to 1.60 per cent by mid-December, before easing off in recent weeks to around 1.5 per cent. Meanwhile, the three-year Australian government bond has climbed around 50 basis points over the same period to 2 per cent, as traders price in expected rises to base interest rates.

The election of Donald Trump as US President, upcoming elections in Europe and Brexit had increased capital market volatility which was feeding into the money markets, Mr Cahill added.

NAB said the standard variable rate for owner-occupier customers remains at 5.25 per cent per annum. "We continue to watch market and economic conditions to ensure we continue to lend and manage our business responsibly, so we remain strong and stable for the benefit of our customers, shareholders, and the broader economy," Mr Cahill said.