Commonwealth Bank slashes variable home loan rates before cash rate decision

Australia’s largest bank is not waiting on the Reserve Bank of Australia, deciding to cut some variable interest rates prior to today’s monetary policy meeting for new borrowers and some existing customers.

The Commonwealth Bank cut some rates by up to 0.28 percentage points but increased some others by up to 0.12 percentage points, effective today.

The changes came into effect just hours before the Reserve Bank of Australia (RBA) board was due to announce whether the official cash rate would remain on hold or be cut further from the historic low of 0.25%.

One of the largest cuts was to CBA’s basic variable rate home loan, called the Extra Home Loan, which was reduced by 0.28 percentage points to 2.79% (comparison rate 2.80%) for owner-occupiers paying principal and interest and who have a deposit of between 20% and 30% (70.01-80% loan-to-value ratio).

The rate now positions CBA ahead of its competitors National Australia Bank and Westpac for this type of variable rate home loan, but ANZ remains ahead of all three of its rival majors, with a variable rate of 2.72% (comparison rate 2.76%) available on its Simplicity Plus home loan.

There are variable rates even lower than those offered by the big four banks though, with Reduce Home Loans having recently cut its Rate Slasher home loan down to 2.39% (comparison rate 2.40%) – the lowest variable rate for owner-occupiers paying principal and interest on Canstar’s database.

Canstar finance expert Steve Mickenbecker said CBA’s cut for borrowers who can muster up a larger deposit was confirmation that the home loan market is very competitive for high-quality borrowers at the moment.

A CBA spokesperson confirmed the reductions were based on a customer’s loan-to-value ratio (LVR) for new borrowing – either for people taking out new loans or switching from an existing CBA home loan to the Extra Home Loan – and that LVRs of above 80% would be excluded from the discount.

CBA’s largest cut to its investor loans also applied to borrowers with a 70.01-80% LVR. The major bank reduced its basic variable rate investment home loans by 0.15 percentage points to 3.27% (comparison rate 3.28%) for investors paying principal and interest, and 3.83% (comparison rate 3.50%) for investors paying interest-only.

To summarise, the changes for owner-occupiers at CBA, effective from Tuesday, 7 April, include:

• Basic variable home loan cut by 0.18 percentage points for owner-occupiers paying principal and interest and interest only, with a 70% or lower LVR.
• Basic variable home loan cut by 0.28 percentage points for owner-occupiers paying principal and interest and interest only, with a 70.01-80% LVR.
• Basic variable home loan increased by 0.06 percentage points for owner-occupiers paying principal and interest and interest only, with an 80.01-95% LVR.

The changes for investment home loan customers at CBA, effective from Tuesday, 7 April, include:

• Basic variable rates cut by 0.15 percentage points for investors paying principal and interest and interest only, with a 70.01-80% LVR.
• Basic variable rate increased by 0.12 percentage points for investors paying principal and interest and interest only, with an 80.01-90% LVR.

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