CBA signals push to grow its investment home lending market with rate cuts

Australia’s largest bank has cut a range of home loan rates, including big reductions for investors, signalling it could be pushing for growth in the investment lending market.
CBA fixed rate cuts 14 Feb 2020
Source: Nils Versemann (Shutterstock)

Commonwealth Bank has cut up to 0.30 percentage points off its one, four and five-year fixed home loans for owner-occupiers and as much as 0.50 percentage points from its one, two, three, four and five-year fixed investment rates, effective today.

Residential home buyers could now apply for a package loan with principal and interest repayments fixed at 3.19% for five years with the major bank (comparison rate 4.26%), which is down 0.30 percentage points.

On those terms, investors could apply for a rate that is only marginally higher at 3.29% (comparison rate 4.63%), after the rate was cut by 0.35 percentage points.

Other investment loans were cut by between 0.25 and 0.50 percentage points, and interest-only customers continue to pay higher rates than those who pay the principal as well.

Canstar finance expert Steve Mickenbecker said CBA’s changes to its investor rates signalled a push for growth in the investment lending market.

“The bank’s fixed-rate, interest-only investment loans are now a uniform 0.20 percentage points higher than investment principal and interest loans – its lowest margin seen since APRA’s crackdown on investment lending,” Mr Mickenbecker said.

“The rate changes mean CBA’s principal and interest investment loans are now only between 0.10 and 0.20 percentage points higher than its principal and interest owner-occupied rates.

“Prior to today’s changes, the margin for the popular three-year fixed principal and interest rate for investment loans was a whopping 0.65% higher than for owner-occupier loans.”

Most of the biggest cuts overall were made to new investment fixed rate loans where customers pay interest only, with these rates cut by 0.40 to 0.50 percentage points.

Mr Mickenbecker said those borrowers were still largely missing out though, as these rates were still higher than if they were paying off the principal of the loan as well.

Even so, he said it wasn’t surprising interest-only loans were still popular, given the prime motivator for borrowers who choose this option was typically freeing up their short-term cash flow through securing lower monthly repayments up until the loan switches to principal and interest payments.

He said the bank’s cuts to both owner-occupier and investment loans today were further confirmation of the hot competition heat in the home loan market.

After all, just a few weeks ago one of CBA’s main competitors, Westpac, also reduced interest rates across a range of investor home loans, which made those rates even lower than what it offered its owner-occupier customers in some cases.

Commonwealth Bank’s new investment home loan rates

Commonwealth Bank Investment Fixed Home Loan Rate Changes
Investment, Principal and Interest (Package)
Fixed Term Old Rate Old Comparison Rate New Rate New Comparison Rate Change
1 Year 3.64% 5.16% 3.19% 5.12% -0.45%
2 Year 3.44% 5.01% 3.19% 4.97% -0.25%
3 Year 3.64% 4.95% 3.19% 4.83% -0.45%
4 Year 3.64% 4.86% 3.29% 4.74% -0.35%
5 Year 3.64% 4.77% 3.29% 4.63% -0.35%
Investment, Interest Only (Package)
Fixed Term Old Rate Old Comparison Rate New Rate New Comparison Rate Change
1 Year 3.89% 5.18% 3.39% 5.13% -0.50%
2 Year 3.79% 5.06% 3.39% 4.99% -0.40%
3 Year 3.79% 4.97% 3.39% 4.87% -0.40%
4 Year 3.99% 4.95% 3.49% 4.79% -0.50%
5 Year 3.99% 4.89% 3.49% 4.69% -0.50%
Source: Commonwealth Bank of Australia. New rates effective 14 February, 2020. *Comparison rates calculated based on a $150,000 loan amount over a total loan term of 25 years. Read the Comparison Rate Warning.

Commonwealth Bank’s new owner-occupier home loan rates

Commonwealth Bank Owner-Occupier Fixed Home Loan Rate Changes
Owner-Occupier, Principal and Interest (Package)
Term Old Rate Old Comparison Rate New Rate New Comparison Rate Change
1 Year 3.29% 4.61% 2.99% 4.59% -0.30%
4 Year 3.49% 4.44% 3.19% 4.34% -0.30%
5 Year 3.49% 4.38% 3.19% 4.26% -0.30%
Owner Occupied, Interest Only (Package)
1 Year 3.89% 4.66% 3.79% 4.65% -0.10%
Source: Commonwealth Bank of Australia. New rates effective 14 February, 2020. *Comparison rates calculated based on a $150,000 loan amount over a total loan term of 25 years. Read the Comparison Rate Warning.

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