Just 14% of variable-rate customers reduced repayments
New Commonwealth Bank data shows that only 14% of eligible variable-rate home loan customers opted to reduce their mortgage repayments following the Reserve Bank of Australia (RBA)’s 0.25% interest rate cut in February.
Most major banks opted to immediately pass through the RBA’s February rate cut, with each of the Big Four, including CBA, announcing a 0.25% decrease to their home loan variable interest rates.
According to CBA, this rate reduction offered potential monthly savings of up to $80 for those with a $500,000 loan making principal and interest repayments.
However, most borrowers chose to maintain existing repayment levels in order to pay down more of their principal.
Michael Baumann (pictured), executive general manager of home buying at CBA, said the trend highlights customer preference for long-term financial flexibility.
“Many customers chose to keep their repayments steady, which can help reduce their loan term and boost redraw balances,” Baumann said.
For those who did lower repayments, more than 95% used digital channels such as the CommBank app or NetBank to make quick adjustments.
With another rate cut all but the RBA’s next cash rate decision due tomorrow, Baumann expects more borrowers to reconsider their finances in the near future.
He said: “If rates fall further, it could deliver greater total savings to eligible home loan customers. As such, I wouldn’t be surprised to see more home loan customers choosing to free up their cash flow by lowering their regular mortgage repayments.”
Baumann encouraged mortgage holders to take advantage of digital self-service tools to adjust repayments based on their evolving needs.
