CommBank allows interest-only home loan switches without credit check

^{Source: CBA}

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. 

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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. 

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Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. 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. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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