CBA wields the interest rate knife in a bid for a bigger slice of the refinancing pie

Australia’s biggest bank, CBA, has launched a brand-new home loan for refinancers with a discounted rate as low as 6.15 per cent, provided borrowers sidestep both the branch, and the broker, and apply online.

The rate on this new “Digi Home Loan” is available for owner-occupiers paying principal and interest with a 40 per cent deposit, with higher rates for other borrowers (see below).

This rate of 6.15 per cent is 0.34 percentage points less than CBA’s former lowest advertised rate of 6.49 per cent.

No offset account is available, however, the loan has a redraw facility if customers want to draw out extra repayments.

Instead of an upfront $2,000 cash sweetener, which the bank used to offer refinancers, it will refund the $10 a month service fee via its Yello platform, and provide other loyalty cashback perks after 12 months.

To be eligible, customers must be refinancing from another lender and not need lenders mortgage insurance (i.e. own at least 20 per cent of their home at today’s values). CBA home loan customers cannot switch into this loan.

Customers will need to apply via the app or online, which is estimated to take 10 minutes. They will be encouraged to self-serve digitally, however, branch and phone support is also available, although from mid 2025, the bank may charge for using these services.

Refinancers not able to meet the standard 3 percentage point stress test can apply using a lower buffer in-line with the bank’s existing policy.

CBA’s new Digi Home Loan variable rates

Source: RateCity.com.au. P&I is principal and interest payments, IO is interest-only.

CBA’s quest to cater to everyone

CBA is not short on home loan options. The bank is now offering four variable rate home loans, including mortgages via its online-only subsidiary Unloan, which launched in May 2022.

CBA’s home loan offerings

Source: RateCity.com.au

How does a rate of 6.15% compare to the rest of the pack?

CBA’s Digi Home Loan rate of 6.15 per cent is in the lowest 12 per cent of all owner-occupier, principal and interest variable rates on RateCity.com.au, excluding green loans and introductory rates.

There are 62 lenders offering at least one advertised variable rate below CBA’s new Digi Home Loan rate of 6.15 per cent, including offers from direct competitors such as the recently launched ANZ Plus (6.14%), Macquarie Bank (6.14%) and Bendigo Bank (6.01%).

Digital-home loans – what’s on offer from some of the larger banks

Source: RateCity.com.au. Note: ANZ Plus not available for properties in Tas, NT and non-metro areas across Australia.

RateCity.com.au research director, Sally Tindall, said: “CBA is continuing to equip itself with options in the digital arms race, particularly against rivals such as ANZ, Bendigo and Macquarie.”

“This new investment from CBA is also evidence there is still life in the refinancing market, provided customers are willing to go digital,” she said.

“The bank has pivoted away from a sign-up cashback sweetener, that ultimately created customer churn, to a self-serve model which includes a lower advertised rate and an ongoing cashback perk, in the hope it will win the bank new customers, and keep them.

“With a rate of 6.15 per cent, CBA’s new Digi Home Loan is in the lowest 12 per cent of all owner-occupier, principal and interest variable rates on the RateCity.com.au database, however, there are still over 60 different lenders offering at least one lower variable rate.

“The bank wants to be something to everyone, yet with no access to the broker network, some customers may decide to opt for challenger banks such as Macquarie for the extra support, or Bendigo for lower interest rates.

“While there’s no question the future of banking is digital, CBA knows it needs to keep its options open. This new Digi Home Loan is based on a self-serve model, but when customers hit a brick wall they can still access support via the phone and in-branch, although they could be stung with a fee for doing so from mid next year.

“Existing CBA customers may be miffed that this new digital home loan is ‘off limits’ to them, however, they should realise it’s the perfect launching pad to talk to the bank about getting a better rate for themselves without having to go digital,” she said.

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