CommBank launches Green Loan and hikes fixed mortgage interest rates

Home loan customers with Commonwealth Bank could soon buy and install solar panels or electric vehicle charging stations with a Green Loan, which is available to apply for from today. The bank has also hiked some fixed mortgage interest rates.

Australia’s largest bank has officially launched its new CommBank Green Loan, which is now available for applications from eligible home loan customers who want to buy and install eligible clean energy products at the property, secured by their existing CBA home loan.

Canstar research expert Mitch Watson said the launch of this product came at a time when Australians were becoming more environmentally conscious and aware of the impact of their choices on their carbon footprint.

“CommBank’s new Green Loan provides a financial incentive to choose greener products through access to lower-cost borrowing,” Mr Watson said.

Commonwealth Bank joined 16 other providers on Canstar’s database offering green loans.

What is the CommBank Green Loan?

Eligible home loan customers at CBA can use the CommBank Green Loan to buy and install renewable energy products to make their homes more sustainable. They could install products such as solar panels, battery packs, solar hot water systems and electric vehicle charging stations. The items purchased and installed would be secured against a customer’s existing home loan.

The Green Loan has a secured fixed interest rate of 0.99% (comparison rate 0.99%) for eligible CommBank customers to fund between $5,000 and $20,000 in renewables. It has a repayment term of 10 years with no set-up, monthly service or early repayment fees. Customers can make additional payments or pay off the loan early with no fees or penalties, CBA says.

Some things worth considering could be that customers wouldn’t have access to an offset account, redraw facility or features like top-ups, according to CBA, and switching and splitting also wouldn’t be available for this loan.

What are CBA’s new fixed home loan rates?

CBA also hiked some of its longer-term fixed home loan interest rates by between 0.05 and 0.10 percentage points for homeowners today, but investors were spared. These are the new rates, for borrowers with at least a 5% deposit (up to a 95% LVR):

New package rates

• Three-year fixed rate, principal and interest repayments (P&I): increased by 0.05 percentage points to 2.19% (3.85% comparison rate)
• Four-year fixed, P&I: increased by 0.05 percentage points to 2.24% (3.74% comparison rate)
• Three-year fixed, interest-only (IO): increased by 0.10 percentage points to 3.49% (4.15% comparison rate)
• Five-year fixed, IO: increased by 0.10 percentage points to 3.89% (4.24% comparison rate).

New standard rates

• Three-year fixed, P&I: increased by 0.05 percentage points to 2.34% (4.12% comparison rate)
• Four-year fixed, P&I: increased by 0.05 percentage points to 2.39% (3.97% comparison rate)
• Three-year fixed, IO: increased by 0.10 percentage points to 3.64% (4.45% comparison rate)
• Five-year fixed, IO: increased by 0.10 percentage points to 4.04% (4.48% comparison rate).

The rate rises of between 0.05 and 0.10 percentage points apply to the bank’s owner-occupier P&I three- and four-year fixed rates and its IO 3- and 5-year fixed rates.

CBA’s lowest fixed rate is its two-year owner occupier fixed package rate at 1.94% (3.93% comparison rate), above the market-leading rate from Canstar’s database of 1.67% (3.84% comparison rate) from BCU for its one-year fixed rate, and the lowest two-year fixed rate of 1.74% (2.23% comparison rate) from Homestar Finance.

CBA’s move to hike fixed interest rates is part of a broader trend of increasing fixed rates, with Canstar’s research showing 38% of lenders on our database have now increased at least one fixed rate in the past two months.

“CommBank’s changes follow recent increases by NAB and Westpac, only leaving ANZ to not have increased interest rates on its fixed rate loans this year,” Mr Watson said.

“For anyone still on the fence about fixing their home loan rate, this is another example of the tide turning on interest rates. Borrowers who may have missed the boat on CommBank’s previous offer can take solace in the fact that these are still historically low interest rates.”

He said borrowers worried about fixed interest rates rising between the time they submitted their application and when their lender approved it could consider purchasing a rate lock for a fee. This would lock their interest rate in at the time of their application, meaning any subsequent changes would not impact it.