THE nation’s largest lender the Commonwealth Bank has today announced it is dropping interest rates for owner occupiers but hitting interest-only customers.
The last of the big four to make an announcement this month, CBA will drop its owner occupier principal and interest rates by just three basis points to 5.22 per cent.
This is the smallest drop to this type of loan among big four banks.
This will save a customer with a $350,000 mortgage about $78 a year.
ANZ remains the cheapest of the big four banks for owner occupier principal and interest loans at 5.2 per cent, followed by CBA at 5.22 per cent, and NAB and Westpac at 5.24 per cent.
NAB and Westpac’s changes kick in on Friday.
But on the flip side variable interest-only rates for CBA owner occupiers and investors will rise by 30 basis points.
Owner occupiers will see a rise to 5.77 per cent, while investor interest-only rates will climb to 6.24 per cent.
Financial comparison website Mozo’s spokeswoman Kirsty Lamont said “the party just gets better for borrowers on principal and interest loans” despite investors not being so lucky.
“With these latest cuts to principal and interest rates for owner occupiers, the Commonwealth Bank now has the second cheapest standard variable rate of any of the big banks for this loan type, only a couple of basis points behind ANZ,’’ she said.
CBA’s group executive of retail banking services, Matt Comyn, said the significant hikes to interest-only loans was a result of the banks having to meet regulatory requirement to slow down interest-only loan growth.
“Paying off your home is important for Australians,’’ he said in an issued statement.
“For owner occupiers repaying principal and interest, they can take advantage of the interest rate reduction to pay off their home loan faster.
“These changes also help us keep the right balance in our home loan portfolio in line with what our regulators require.”
Home Loan Experts’ managing director Otto Dargan said there was increased incentives for borrowers to opt to make principal and interest repayments but said smaller lenders may be forced to make similar changes to the big four by hitting interest-only customers harder.
“Any smaller lenders that don’t make similar changes to the major lenders will get swamped with applications for interest-only loans and will then be penalised by the Australian Prudential and Regulation Authority.
“So changing banks won’t help, it’s time to consider paying principal and interest if it’s suitable for you.”
CBA’s changes will be effective from July 7.
Originally published as Comm Bank joins interest rate drop