Australia's biggest bank has offered another lifeline to customers experiencing financial hardship due to COVID-19.
Commonwealth Bank (CBA) announced it would be allowing customers to apply for a one-year interest-only (IO) extension, or switch if they are currently making principal and interest repayments, without requiring a serviceability assessment.
From 29 May, customers will be eligible for the IO switch/extension when:
- They are not in arrears;
- They are not in financial hardship;
- There will be a minimum of 1 year remaining on the contracted loan term at the expiry of the proposed interest-only term
Borrowers who have deferred their home loan repayments for six months are eligible for the switch if they are no longer in financial hardship and have contacted CBA to cancel their deferral.
Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.
Smart Booster Home Loan
- Discount variable for 1 year <=80% LVR
- No ongoing fees
- Unlimited redraw facility
Monthly repayments: $1,476
- Discount variable for 1 year
- No ongoing fees
- Unlimited redraw facility
CBA Group Executive Angus Sullivan said the move was made to further support customers through the economic fallout from the pandemic.
"We recognise that as the coronavirus situation evolves and customers start returning to work, they may require alternative temporary assistance measures to help them get back on their feet sooner," Mr Sullivan said.
"As part of this we are temporarily allowing existing home loan customers to apply for a one-year interest-only extension or switch if they are currently making principal and interest repayments without requiring a serviceability assessment.
"Eligible customers will be able to easily apply for an extension or switch digitally via NetBank.
"Customers can also speak to their Broker, visiting us in branch or by calling our Australian-based call centres."
Mr Sullivan added that any customers financially impacted by COVID-19 could contact CBA to see what support options were available to them.
CBA isn't the first lender to announce interest-only extensions for struggling customers: Westpac last week announced it would do the same.
Westpac General Manager, Home Loans Will Ranken said eligible home loan customers could switch from principal and interest repayments to interest-only, or extend their current interest-only home loan term for a further 12 months without a serviceability assessment.
"We recognise that many customers who have been financially impacted by COVID-19 still want the option of making some repayments during this time," Mr Ranken said.
“These changes mean it is now simpler for customers to apply to extend their interest-only loan term, or switch their repayments to interest only."
CBA support measures
Interest-only switches are just one of several support measures CBA has announced as part of its pandemic response.
At the start of May, the bank controversially started moving customers' home loan repayments to the minimum, which it said would release an average of $400 a month for customers.
But the move was criticised for lengthening the life of borrowers' loans, costing them tens of thousands in additional interest costs.
CBA said it had repayment deferral requests on approximately 144,000 home loans with balances totalling $50 billion, 71,000 business loans with balances totalling over $15 billion, and 25,000 personal loans.
The bank also said it had approved more than 6,500 loan applications under the Government's small and medium-sized enterprise Guarantee Scheme, totalling over $500 million of new lending.
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.
In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
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