CBA trims home loan rates

The Commonwealth Bank has trimmed the rate on its ‘no frills’ home loan for homeowners and investors. 

The move sees the major bank’s Extra Home Loans cut by 0.10 percent for owner occupiers and up to 0.15 percent for investors, taking the lowest variable rate offer from the bank to 2.69 percent.

While the Extra Home Loan is one without an offset or extensive features, it does allow for additional repayments and redraw, which Canstar advised are two critical features of a loan that enable borrowers to pay their loan off sooner.

Canstar analysis shows CBA’s owner occupied Extra home loan rate of 2.69% (2.70% comparison rate) is 1.16% below the bank’s loan with an offset account being its Wealth Package at a variable rate of 3.85% (4.27% comparison rate).

The difference in monthly repayments between the two on a $400,000 loan over 30 years is $255. Borrowers need to decide whether they value the extra benefits of the package loan that highly.

Looking across the market, further analysis shows mortgage holders will pay an average of 0.37% more for a variable rate loan with an offset account, or $81 each month on a $400,000 home loan over 30 years.

Canstar’s Group Executive, Financial Services, Steve Mickenbecker says borrowers will typically pay more for a loan with an attached offset account so it might be worth considering one of the basic loans available and taking advantage of the extra repayment feature. 

 “Getting ahead of your home loan repayment schedule works to recession proof your finances and helps build long term wealth.”  

He said when no frills loans first hit the market, they came with the drawback that you could not make extra repayments to get ahead. 

“For Commonwealth Bank in particular, a no frills loan may work for borrowers who don’t see the value of the additional benefits of the packaged loan that could be costing them an extra could be costing them an extra $255 a month.”

The CBA changes: