Why you should consider Commonwealth Bank (CBA) as a bank and why CBA Home Loan Rates represent great value. 

An Introduction to Commonwealth Bank

The Story Behind CBA

CBA is Australia’s largest home loan provider, having lent Australian’s a total of $477 Billion as at 30 June 2020, which represents an approximately 25% market share. CBA is also Australia’s oldest bank, having previously been owned by the Australian Government before being privatised in 1991, hence the name “Commonwealth Bank”. Commbank is listed on the Australian Stock Exchange with a market capitalisation of over $120 Billion, with it’s share price $69.70 as at 30 June 2020.

CBA’s Extensive Service Offering

CBA’s services are extensive, offering retail banking, private banking and small business banking, to individuals and small businesses, with mortgages and competitive Commbank interest rates making up a core product offering. Today, Commonwealth Bank has over 1,000 branches around Australia and over 4,000 ATM’s. CBA are also known for their market leading innovation in internet banking, with NetBank offering superior features to other Australian banks.

The bank also offers Corporate and Institutional Banking Services to other large corporate clients. Commonwealth Bank Interest Rates are also viewed as competitive at the institutional level, however this will not be explored. The bank is also known for its share trading platform CommSec and other services CommInsure. 

The Executive Team

CBA is headed by CEO Matt Comyn who previously led the bank’s Retail Banking Services (which looks after mortgages and Commonwealth Bank Home Loan Interest Rates) and CommSec. It’s chairperson is Catherine Livingstone who also previously chaired Telstra Corporation. The Bank is also known for its extensive community work and longstanding sponsorship of Cricket Australia.

Overview of CBA Home Loan Products

Before looking into Commonwealth Bank Home Loan Rates, it is worth considering the types of home loans the bank offers, and it’s features. CBA is a full service bank, meaning it offers the full suite of home loan products whether Home Loans, Investment Loans, Fixed Loans, Variable Loans, Principal & Interest or Interest Only. 

CBA’s Full Service Product – The Mortgage Advantage Package

It’s flagship loan product is it’s Mortgage Advantage or “MAV” Package if obtained through a mortgage broker. Sometimes if obtained through a branch it is referred to as the “Wealth Package”, however it is exactly the same product. Under a MAV Package you are entitled to multiple Offset Accounts, a fee-free credit card, and access to discounted insurance through CommInsure. CBA’s standard market leading services also come standard in a MAV package such as an extremely large atm and branch network, and CBA’s market leading CommBank Mobile App on both iPhone and.

While these services do come at a cost, with a $395 annual fee, this fee does represent enormous benefit if you use all of CBA’s loan features, especially considering that CBA’s top Diamond Credit card annual fee is already $350 per annum. 

The most important benefit under the MAV package is a significant discount offered to Commonwealth Bank Home Loan Rates, no matter what type of loan you take out. The discount to your CBA Home Loan Rates are approximately 0.7% – 1.5% for variable rates and 0.1 – 0.3% for fixed rates. For example, you will get a 0.7% rate discount without even trying. This is a significant saving!

CBA’s Basic Product – Extra Home Loan

The alternative to getting a MAV Home Loan, is to apply for Commbank’s most basic product called the “Extra” Home Loan. Under this product you still get an extremely competitive CBA Home Loan Rates for Owner Occupied and Investment loans, where the Commbank interest rates are 2.79% to 3.13% (as at 30 June 2020) depending on LVR for a Home Loan, however there is no annual fee. Just keep in mind that with no annual fee means no offset account, no fee free credit and no discount to other products. However, you still have access to all of CBA’s atm, branch network, and internet banking facilities. The loan also does have a redraw fee which means if you pay extra into your home loan or make payments in advance, you can take this money back out at any time. 

Looking for more information on Commonwealth Bank Home Loan Rates and Products

Contact us today and we’ll put you in touch with one of our trusted mortgage broker experts. Whether you’re looking for advice to better understand your options or information specific to your needs, we’re here to help.

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CBA as a Prime Lender

Before making an application, it’s Important to note that CBA is a “prime” bank or full document lender. While the bank has a broad policy range and can take on many different scenarios, you must fit the bank’s criteria to get approved and get access to Commonwealth Bank Home Loan Interest Rates. You may otherwise need to apply to another bank or even a non-bank lender.

How to Understand Commonwealth Bank Home Loan Rates

To understand Commonwealth Bank Interest Rates, and how your home loan rate is determined, you need to understand what is the CBA Home Loan Rate – Standard Variable Rate.

The Standard Variable Rate (SVR) is the rate off which Commonwealth Bank Home Loan Interest Rates are priced, and is divided into four loan types or categories. At time of writing (30 June 2020) these loan types and their corresponding SVR’s are:

  • Owner Occupied, Principal & Interest – 4.55% pa
  • Owner Occupied, Interest Only – 5.04% pa
  • Investment, Principal & Interest – 5.13% pa
  • Investment, Interest Only – 5.39% pa

You can already see from here that there is approximately a 0.49% difference between Principal & Interest and Interest Only Owner Occupied rates, and 0.26% difference between Principal & Interest and Interest Only Investment Rates. We say “approximately” because this difference can be larger or smaller based on rate negotiation.

From these SVR or “Reference Rates” a discount is applied to arrive at your final interest rate. For example, if you have an Owner Occupied Principal & Interest home loan and achieve a 1.60% discount, the final rate to you will be 3.95% pa. Further examples are set out below.

There are also set reference rates for Commonwealth Bank Home Loan Interest Rates in relation to Fixed Rates, and this will be explained further below.

Types of CBA Home Loan Rates

CBA Home Loan Rates – Owner Occupied Home Loans

An owner occupied loan is where the owner / borrower lives in the property as their home. This can be their primary place of residence or even a holiday home, as long as it can be proved to the bank that they can afford a second (or third, fourth, fifth etc) home.

Commonwealth Bank is Australia’s largest home lender out of the “Big 4” banks. While Commonwealth Bank Home Loan Rates are never the cheapest in the market, they are not the most expensive either meaning they are a good benchmark for how lenders would be pricing in the market. In light of CBA’s overall product features, you get a lot for the rate you pay. Owner occupied rates are different whether you are taking out a fixed loan, variable loan, interest only loan or principal & interest loan.

As at 30 June 2020, Commbank Owner Occupied Home Loan rates were as follows:

  • Owner Occupied Principal & Interest Variable – 2.80% pa
  • Owner Occupied Principal & Interest 2 Year Fixed – 2.29% pa
  • Owner Occupied Interest Only Variable – 3.27% pa
  • Owner Occupied Interest Only 2 Year Fixed – 3.79% pa

CBA Home Loan Rates – Investment Home Loans

An investment home loan is one where the owner does not live in the property, but the property is rented out to a tenant for an investment return. There is both a return in terms of the rental payments or ‘yield’, as well as the capital growth of the property from an appreciation of the property price over time.

CBA is an extremely large lender for investment properties. For Investment Loans, Commbank interest rates typically ‘follow the leader’ rather than being the cheapest on the market. It’s important to note that investor rates are typically higher than owner occupied rates for all lenders, and this is no different for Commonwealth Bank Interest Rates. As with owner occupied home loans, investment rates have a different price depending on the type of loan you take out (fixed, variable, interest only or principal & interest).

As at 30 June 2020, Commonwealth Bank Investment Home Loan rates were as follows:

  • Investment Principal & Interest Variable – 3.43% pa
  • Investment Principal & Interest 2 Year Fixed – 2.69% pa
  • Investment Interest Only Variable – 3.69% pa
  • Investment Interest Only 2 Year Fixed – 2.89% pa

How to Decide Between A Commbank Interest Rate That Is Fixed or Variable

Commonwealth Bank Home Loan Interest Rates – Variable Rates

Variable Rates move in line with the Reserve Bank of Australia or when the bank decides to change interest rates. Interest rates can change out of cycle when a bank needs to increase or maintain its profitability in response to rising cost pressures on the bank. Commonwealth Bank Home Loan Rates tend to move in line with the RBA and, being Australia’s biggest home lender, CBA is usually very quick to respond to RBA changes. However, the full benefit of an RBA interest rate cut is not always passed on. For example if the RBA reduces the cash rate by 0.25%, CBA Home Loan Rates may only fall by 0.15%. By the same token, if the RBA increases interest rates by 0.25%, Commbank interest rates have been known to increase by 0.30% or more. Again, the degree of change depends on the margin pressures the bank is facing at any point in time.

As at 30 June 2020, CBA Variable rates were as follows:

  • Owner Occupied Principal & Interest Variable – 2.80% pa
  • Owner Occupied Interest Only Variable – 3.27% pa
  • Investment Principal & Interest Variable – 3.43% pa
  • Investment Interest Only Variable – 3.69% pa

Commonwealth Bank Home Loan Interest Rates – Fixed Rates

Fixed Interest rates are offered for a set period of time, for example 1, 2, 3, 4 or 5 years, and do not change with the market. After the fixed rate expires, the loan will revert to a variable interest rate. The primarily benefit of a fixed rate is certainty, and helping you with your household budgeting. For a savvy borrower fixed rates can be used to protect against expected future rate increases. However if rates fall, then you are stuck with the fixed rate and paying a higher cost. A significant disadvantage of fixed rates is that you cannot break a fixed rate early. So while you get the benefit of a fixed repayment, the bank gets the benefit of locking in the interest owed to them should you break your fixed rate early. Commonwealth Bank Home Loan fixed rates are known to be competitive but rarely market leading. CBA will typically match what is the best fixed rate available from another major bank, but they are not known to lead the market with fixed rate specials.

As at 30 June 2020, CBA Fixed rates were as follows:

  • Owner Occupied Principal & Interest 2 Year Fixed – 2.29% pa
  • Owner Occupied Interest Only 2 Year Fixed – 3.79% pa
  • Investment Principal & Interest 2 Year Fixed – 2.69% pa
  • Investment Interest Only 2 Year Fixed – 2.89% pa

Need help deciding between Fixed or Variable Rates

Our mortgage broker experts can help you assess the benefits of either a fixed or variable home loan rate and provide zero-obligation advice on the best commonwealth bank home loan rates for your financial situation.

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Choosing Between CBA Home Loan Rates that are Principal Only or Principal and Interest

Principal & Interest Rates

A Commonwealth Bank principle & interest home loan is one where there is a component of principal and a component of interest in every repayment. This causes the “loan balance” or “loan outstanding” to gradually decline over time, which in technical finance terms is known as “amortisation”. In each repayment the proportion of principal and the proportion of interest is constantly changing, such that the longer you have the loan, the greater the principal component of each repayment relative to the component of interest. This causes the loan to be paid off more rapidly the further you are into the loan. Like all other lenders, Commonwealth Bank Home Loan Interest Rates for Principal & Interest are priced better than Interest Only Rates. This is because CBA encourages borrowers, especially home borrowers to take out a principal & interest loan rather than an interest only loan.

As at 30 June 2020, Commbank Principal & Interest rates were as follows:

  • Owner Occupied Principal & Interest Variable – 2.80% pa
  • Owner Occupied Principal & Interest 2 Year Fixed – 2.29% pa
  • Investment Principal & Interest Variable – 3.43% pa
  • Investment Principal & Interest 2 Year Fixed – 2.69% pa

Interest Only Rates

A Commbank Interest Rate Only home loan is one where the loan does not reduce over time. Rather an interest is calculated based on the loan balance (net of offset funds) at any point in time, and only interest is paid. This can be considered a “holding cost” for the loan and therefore the property. Interest Only rates are typically only allowed for a maximum period of 5 years. From there, the loan reverts to principal and interest however the principal must now be paid back on a reduced term. For example, a 30 year home loan with a 5 year interest only period where the interest only period has expired, will revert to a 25 year principal and interest loan. Because the same amount of money needs to be paid over 25 years rather than 30 years, borrowers can experience repayment shock. It’s for this reason that banks discourage Interest Only loans where possible, especially for homeowners. Commonwealth Bank Interest Only Home Loan Interest Rates follow this trend by typically being 0.4% – 0.5% higher than their principal & interest counterparts. 

As at 30 June 2020, Commonwealth Interest Only rates were as follows:

  • Owner Occupied Interest Only Variable – 3.27% pa
  • Owner Occupied Interest Only 2 Year Fixed – 3.79% pa
  • Investment Interest Only Variable – 3.69% pa
  • Investment Interest Only 2 Year Fixed – 2.89% pa

What to do next?

Are you looking for help with a CBA home loan? Would you like to take your enquiry to the next step? Don’t hesitate to reach out to one of our home loan experts who can help you with arranging a CBA home loan.

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