CBA turns its back on variable rate customers as they opt to slice fixed rates instead

Australia’s biggest bank has today announced it will not be passing on the rate cut to its existing variable rate customers, opting to cut fixed rates instead.

As a result, the majority of their customers will get no relief on their mortgage repayments on the back of yesterday’s rate cut, with the exception of those variable customers who choose to switch to a fixed rate from November 11.

Notes: based on an owner occupier paying principal and interest over 30 years with a $400K loan.

RateCity.com.au research director, Sally Tindall, said that most CBA home loan customers would be left feeling short-changed on the back of today’s decision from Australia’s largest bank.

“Many borrowers will be rightly frustrated at CBA’s decision not to pass on a rate cut to its variable customers, particularly as it’s the second time in a row,” she said.

“As a result, the bank’s variable rate customers have missed out on a potential rate cut of 0.15 per cent today, in addition to the 0.25 per cent they chose not to pass on in March.

“The sprinkling of fixed rate cuts the bank has offered up as an alternative aren’t going to cut it with many of their customers who are not in a position to refinance or fix their loan, including anyone still on a mortgage deferral.

“A rate of 1.99 per cent, fixed for four years is a great headline but the reality is, fixing isn’t for everyone.

“Fixed rates are typically a lot less flexible, usually with no offset account, limits on extra repayments and break fees if you want to get out early,” she said.

CBA home loan rate changes

Note: the above rates are for owner occupiers paying principal and interest based on a loan balance of $400K.

Extra repayments – fixed rate caps from the big four banks

CBA: up to $10,000 per year

Westpac: up to $30,000 per fixed rate term

NAB: up to $20,000 per fixed rate term

ANZ: ANZ: 5% of the loan balance or $5,000 per year, whichever is less. (The 5% is calculated at the start of the fixed period).

Things to consider before fixing

• Will I want to make extra repayments? Most banks have caps on how much extra you can repay while on a fixed rate.
• Do I need an offset account? Most banks don’t offer an offset account on their fixed rates.
• Will I need to get out of the loan early? There can be hefty break fees if you do.
• What is the revert rate? If you do fix, make a note of when the fixed term ends so you can negotiate a lower variable rate, refix or refinance. If you set and forget your fixed rate for the long term it could end badly.

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