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How to get a huge interest rate cut on your mortgage despite fears of more pain to come
- The Commonwealth Bank lowered mortgage rates for people with a down payment of 40 percent
- Australia’s largest mortgage lender has the lowest offset account rate at 4.57 percent
- That’s a big drop from Commonwealth’s previously advertised rate of 6.6 percent
- RateCity research director Sally Tindall said this could lead to other banks
The Commonwealth Bank, Australia’s largest mortgage lender, is offering huge discounts on mortgages despite forecasts of more rate hikes.
But the catch is that borrowers must have a hefty 40 percent down payment on their home instead of the usual 20 percent down payment.
As of Monday, new Commonwealth Bank borrowers paying off principal and interest with a Wealth Package loan will be offered a mortgage interest rate of just 4.57 percent.
Among the major banks, the Commonwealth Bank now offers the lowest variable interest rate mortgage with a contra account, whereby borrowers with more savings in the bank pay interest on a reduced loan amount.
The new loan rate represents a significant drop of 2.03 percentage points from the previously advertised compensation rate of 6.6 percent — but this privilege requires owner-occupier borrowers to pay an annual fee of $395.
Australia’s largest lender, the Commonwealth Bank (branch pictured), is offering a huge discount on mortgages, despite forecasts of more rate hikes. Borrowers
It’s also lower than the Commonwealth Bank’s more common mortgage rate of 4.79 percent for borrowers with a 20 percent down payment with no offset account.
RateCity research director Sally Tindall said the Commonwealth Bank’s latest mortgage rate cut could lead the other banks to announce special discounts to less risky borrowers as well.
“The big banks have been offering special discounts for years to select customers that others can’t see,” she said.
“This move by CBA is hopefully one step closer to the end of this cloak of secrecy.
“These discounts will help Australia’s largest bank strengthen its loan portfolio with rock solid borrowers well positioned to withstand the pressure of rising interest rates.”
By comparison, ANZ’s lowest equivalent rate is 5.74 percent for borrowers with a 20 percent down payment, with an annual fee of $120.
Westpac has a 5.94 percent mortgage interest deduction for those with a 30 percent mortgage down payment and an annual fee of $395.
RateCity research director Sally Tindall said the Commonwealth Bank’s latest mortgage rate cut could lead the other banks to announce special discounts to less risky borrowers as well
NAB offers a 6.37 percent mortgage rate for loans of $750,000 or more with an annual fee of $395.
“Westpac, NAB and ANZ will now be under pressure to lower advertised prices for their package mortgage rates, which are now significantly higher than their closest competitor’s offerings,” Ms Tindall said.
However, smaller banks offer lower mortgage rates linked to a contra account than the Commonwealth Bank.
Auswide Bank has the lowest advertised rate of 4.26 percent for those with a 25 percent down payment, charging an annual fee of $395.
Variable-rate borrowers are hurting more as economists expect more rate hikes from the Reserve Bank of Australia, with annual inflation in the September quarter reaching 7.3 percent, the highest point in 32 years.
This is more than double the RBA’s target of two to three percent.
The Commonwealth Bank expects the Reserve Bank to raise cash rates to a new 10-year high of 3.1 percent in December, up from the existing nine-year high of 2.85 percent.
Westpac and ANZ forecast an 11-year high cash rate of 3.85 percent by May, while NAB forecast a cash rate of 3.6 percent by March 2023.