CBA launches new digital home loan Unloan, touting applications in just 10 minutes

Source: Olga Kashubin/Shutterstock.com.

Commonwealth Bank has today launched a new digital-only home loan product, Unloan, which the major bank says customers can apply for in as little as 10 minutes.

While it’s not the first lender to offer digital-only home loans in Australia – providers including Nano and Tic:Toc already have digital-only products available for borrowers – CommBank says Unloan will be a first of its kind for a digital home loan, due to the gradually increasing loyalty discount on offer to customers who remain on the product over time.

What is Unloan?

Unloan is a new, digital-only home loan from Commonwealth Bank. Touted as “a new kind of home loan”, Unloan is unique in the way it rewards customers for their loyalty. When announcing the release of the new product, CommBank said that Unloan will offer customers a discount that increases every year for up to 30 years.

It is currently available for refinance home loans, and CommBank plans to make it available for new homebuyers in months to come.

What’s the interest rate on the Unloan home loan?

Announcing the new home loan product today, CommBank said Unloan offers owner-occupiers one variable rate, priced at 2.14% p.a. (2.06% p.a. comparison rate), with a loyalty discount that grows by 0.01 percentage points every year, up to 30 years. As a hypothetical example, CommBank’s website for Unloan says if a borrower took out this loan today the rate would fall to 2.04% (2.06% comparison rate) after 10 years (though this assumes interest rates remain unchanged throughout this time, which the major bank notes is unlikely).

For investors, Unloan also offers one variable rate of 2.44% p.a. (2.36% p.a. comparison rate) and the same loyalty discount that grows by 0.01 percentage points every year, up to 30 years.

When can you sign up for Unloan?

CommBank has said that from today, 17 May 2022, Unloan is accepting applications to refinance home loans up to $3 million, with a loan-to-value ratio (LVR) of up to 80% of the property’s value.

In the coming months, CBA plans to expand Unloan into new home loans, and also enable Open Banking-powered assessments for an even faster application experience.

The bank promises that Unloan will “strip away” many of the complexities seen in more traditional lending options, with a digital customer experience that allows applications to be completed in as little as 10 minutes.

According to Unloan, its home loans can only be managed via the Unloan website and not available in the CommBank app, branches or call centres.

A new option for customers coming off fixed rate home loans

Canstar finance expert, Effie Zahos, said CommBank has chosen an auspicious time to launch the product to the market, especially in light of the fact that around $19 billion worth of its fixed rate home loans are due to roll off fixed rates in June and face potential rate rises.

“For those fixed loan customers facing an increase in repayments, this new digital home loan offering presents a great opportunity for the bank to keep its customers within the group,” she said.

“With a rate of 2.14%, Unloan is not the cheapest in the market but considering roughly 73% of owner-occupier borrowers bank with the big four, when compared to the average cheapest rate of the major banks of 2.37%, it’s a difference of 0.23 percentage points.”

“It’s a simple proposition,” she continued, “a no-frills home loan with a basic rate, no fees and a loyalty discount. However, with the loyalty discount sitting at just 0.01 percentage points per year, Unloan customers would have to remain loyal for a total of 35 years for it to match the current cheapest variable rate in the market for an 80% LVR loan.”

Ms Zahos said there are certain things customers should watch out for if they are considering a switch to this new digital home loan.

“Unloan customers [will] need to keep track of what repayments are sitting in their redraw account, as repayments are processed on a monthly basis, with extra repayments sitting in redraw,” she said.

“Given the nature of how this loan works, there is the possibility of withdrawing too much out of your redraw facility and not leaving sufficient funds in your loan account to meet the next minimum monthly repayment.”

How does Unloan’s home loan stack up?

Canstar’s researchers crunched the numbers and found how an Unloan home loan might stack up against CommBank’s current lowest variable rate, and how much monthly repayments might be after seven years, which is the average length of time Australian home loan borrowers remain with their current lender.

Lowest existing CommBank variable rate for owner-occupiers versus Unloan

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	CommBank lowest variable rate	Unloan*
Start
Interest rate	2.29%	2.14%
Comparison rate^	2.30%	2.06%
Loan amount	$500,000	$500,000
Monthly repayment	$1,921	$1,883
After 7 Years
Interest rate	2.29%	2.07%
Comparison rate	2.30%	2.06%
Loan amount	$411,965	$409,872
Monthly repayment	$1,921	$1,868
Total interest paid	$73,366	$67,484

Source: www.canstar.com.au – 17/05/2022. Interest rates based on owner-occupier variable rates available for a loan amount of $500,000, at 80% LVR with principal & interest repayments.

Loan calculations based on a $500,000 loan repaid over a total of 30 years using principal & interest repayments. *Unloan offers owner-occupiers a variable rate of 2.14% (2.06% comparison rate), including a loyalty discount that grows by 0.01 percentage points every year, up to 30 years. Monthly repayment figures exclude fees and assume all home loan interest rates remain the same over time; actual repayment figures will change along with interest rates. ^Comparison rate calculated based on a loan amount of $150,000 and loan term of 25 years. Read the Comparison Rate Warning.

What are the lowest variable home loan rates on Canstar’s database?

While Unloan’s 2.14% interest rate (comparison rate 2.06%) is lower than the average variable rate among similar home loans on Canstar’s database, there are still lower-rate options out there for those looking to borrow with an LVR of 80%.

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Product	Interest rate	Comparison rate^	Monthly repayment
Reduce Home Loans Super Saver Variable ≤80%	1.79%	1.88%	$1,796
loans.com.au Smart Booster Home Loan Intro 2 yrs	1.85%	2.21%	$1,811
Well Home Loans Well Balanced P&I ≤80%	1.85%	1.88%	$1,811
Pacific Mortgage Group Variable P&I 60-90%	1.87%	1.87%	$1,816
Tic:Toc Home Loans Live-in Variable P&I	1.89%	1.90%	$1,821

Source: www.canstar.com.au – 17/05/2022. Based on owner-occupier variable loans on Canstar’s database, available for a loan amount of $500,000, at any LVR and using principal & interest repayments. ^Comparison rate calculated based on a loan amount of $150,000 and loan term of 25 years. Read the Comparison Rate Warning. Lowest rates selected based on the lowest interest rate, followed by the lowest comparison rate. Monthly repayments calculated based on a $500,000 loan repaid over 30 years using principal & interest repayments, excluding fees and assuming interest rates remain the same throughout that time.

COVID-19 saw Aussies shift to digital banking

Announcing the product last August, Angus Sullivan, CBA’s Group Executive for Retail Banking Services, said the bank hoped to deliver a world-best digital banking experience for Australian customers, especially as more of us turn to digital and online banking in the wake of the pandemic.

Online banking is not a new phenomenon in Australia, but Mr Sullivan said CBA wanted to “remain a leader in Australia’s digital banking space and continues to aim to be at the global forefront of the digital experience.”

“With more than one in four Aussie home loans with [Commonwealth] Bank, this is a natural and fitting next step in our digital strategy, which continues to put our customers changing preferences at the forefront,” he said.

Mr Sullivan said the COVID-19 pandemic had seen a shift in the behaviour of Australian banking customers, with many turning to digital banking throughout the extended lockdown periods in many of the nation’s capital cities, and CBA’s push into digital banking platforms recognised this.

Cover image source: Olga Kashubin/Shutterstock.com

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This article was reviewed by our Sub Editor Tom Letts and Deputy Editor Sean Callery before it was updated, as part of our fact-checking process.

Alasdair Duncan

Senior Finance Journalist

Alasdair Duncan is a Senior Finance Journalist at Canstar, specialising in home loans, property and lifestyle topics. He has written more than 200 articles for Canstar and his work is widely referenced by other publishers and media outlets, including Yahoo Finance, The New Daily, The Motley Fool and Sky News. He has featured as a guest author for property website homely.com.au.

In his more than 15 years working in the media, Alasdair has written for a broad range of publications. Before joining Canstar, he was a News Editor at Pedestrian.TV, part of Australia’s leading youth media group. His work has also appeared on ABC News, Junkee, Rolling Stone, Kotaku, the Sydney Star Observer and The Brag. He has a Bachelor of Laws (Honours) and a Bachelor of Arts with a major in Journalism from the University of Queensland.

When he is not writing about finance for Canstar, Alasdair can probably be found at the beach with his two dogs or listening to podcasts about pop music. You can follow Alasdair on LinkedIn and Twitter.

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