Commonwealth Bank fires up ‘digital arms race’ with 6.15 per cent refinancing offer

Commonwealth Bank Australia (CBA) is hoping to win refinancers looking to leave rival banks with a new 6.15 per cent digital home loan.

The offer, which was announced on Monday, is available to owner-occupier borrowers who have a 40 per cent deposit, and are willing to enter a principal and interest payment scheme.

Customers must apply online, and cannot access the deal through a broker.

The 6.15 per cent variable rate is 0.34 percentage points lower than rates previously advertised by CBA, and is lower than the RBA’s average new home loan rate of 6.28 per cent.

Borrowers with a smaller deposit percentage can also access the Digi Home Loan product, however a slightly higher rate of 6.17 per cent will apply to deposit sizes between 30 per cent to 39.9 per cent, or 6.19 per cent for deposits between 20 per cent to 29.9 per cent.

According to comparison site RateCity.com.au, the 6.15 per cent rate puts the home loan in the lowest 12 percentile for owner-occupier, principle and interest variable rates.

RateCity.com.au research director Sally Tindall said the offer was a sign of CBA’s attempt to corner the “digital arms race,” in a show of force against rivals like ANZ, Bendigo and Macquarie.

The bank, which is Australia’s biggest, still faces competition from 60 other lenders offering a at least one lower variable rate, said Ms Tindall.

“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 (previously $2000), 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.”

Although the loan carried ongoing fees of $10 a month, the charge can be refunded through CBA’s rewards program, Yello.

However, Ms Tindall said CBA could also risk agitating existing customers who are unable to access the deal, with the current standard variable rate for owner-occupiers listed at 6.49 per cent.

Investors face a higher rate of 6.60 per cent.

“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,” she said.

“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.”