Commbank starts reducing customers' home loan repayments to the minimum

author-avatar By
on May 01, 2020
Commbank starts reducing customers' home loan repayments to the minimum

Photo source: CBA

Commonwealth Bank has started to automatically reduce home loan repayments for eligible customers to the minimum amount.

The move was announced on March 19 as part of a number of measures introduced in response to the coronavirus, and CommBank (CBA) said it expected the move to affect almost 750,000 of its 1.7 million home loan borrowers. 

Customers were notified via an email last week the one-off change would be rolled out from 1-5 May.

Customers who wished to opt-out from the change could do so by changing their direct debit via the CBA app or contacting the bank directly after 6 May. 

For customers already paying the minimum, nothing will change.

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. 

Lender

Variable
More details
UNLIMITED REDRAWS
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWS

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
  • Low rate home loan with added benefits, add offset for 0.10%
  • Save thousands & make an environmentally conscious choice on your loan for homes less than 12 months old
  • Get a 7.0 star NatHERS rating or higher for up to 1.59% discount on your variable rate home loan T&Cs apply

Green Home Loan (Principal and Interest)

  • Low rate home loan with added benefits, add offset for 0.10%
  • Save thousands & make an environmentally conscious choice on your loan for homes less than 12 months old
  • Get a 7.0 star NatHERS rating or higher for up to 1.59% discount on your variable rate home loan T&Cs apply

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *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. Rates correct as of August 7, 2022. View disclaimer.

CBA said in a statement the change was designed to give customers experiencing financial hardship a cash injection. 

"Over the past couple of months, and in particular since the coronavirus pandemic was declared, we have been contacted by hundreds of thousands of our customers seeking help and financial relief, particularly from those people who have been stood down by their employers or have lost their jobs," the bank said.

"This has had a significant and substantial effect on their income.

"As a consequence, we have announced several measures to support our customers including moving nearly three-quarters of a million of home loan borrowers to the monthly minimum repayment amount."

CBA said the change would release an average of $400 a month for customers but recognised the move wouldn't please everyone. 

"We do understand that this decision does not suit all of our customers and appreciate that we may have caused some of them an inconvenience."

The big four bank said it had received around 2,600 complaints as a result of the move, representing 0.35% of their affected customers. 

The move has been labelled controversial by many, as the consequences of not opting out could see the loan take longer to repay. 

Should you reduce your home loan repayments to the minimum? 

Nothing comes for free and despite the CBA figure of customers getting an extra $400 a month for reducing their payments, it's likely the move will cost more down the track. 

For customers experiencing financial hardship, lowering your repayments to the minimum might be a necessity, especially for those struggling to meet the repayments on their home. 

But for those not in this boat, keeping your repayment as is will usually be financially beneficial. 

So how does this work?

You can pay more than the minimum loan repayment and actually pay off your home loan faster, since a greater share of your repayments will be paying off the loan’s principal and less in interest.

You can pay off bigger chunks of your home loan by keeping repayments the same, as this could be much more financially beneficial than saving money to spend on items in the short term, as home loans are one of, if not the single biggest expense you’ll ever have.

In the table below you can see the tens of thousands you could save by resisting the temptation to lower your repayments after a rate cut from 4.00% p.a. to 3.50% p.a.

Interest rate

Monthly repayments

Total repayment

Total savings (from 4.00% p.a.)

Loan length

4.00% p.a.

$1,910

$687,478

N/A

30 years

3.50% p.a. (after two years of paying 4.00% p.a)

$1802

$651,312

$36,166

30 years

3.50% p.a. (after two years of paying 4.00% p.a)

$1,910 (minimum repayment of $1802 + extra payment of $108

$628,808

$58,670

27.5 years

Note: This scenario assumes there’s no more rate changes after the rate falls to 3.50 p.a%

Assuming you kept your repayments in this mock scenario at $1,910 despite the lower interest rate of 3.50% p.a (which kicked in two years into the loan), the rate cut could save you $58,670 over the life of the loan - over $22,500 more than if you’d lowered your repayments to the new minimum of $1,802.

It could also see you pay off your loan two and a half years earlier. 




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.

Latest Articles

author-avatar
Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

Collections:

Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree
to the Savings Privacy Policy