Australia's biggest bank has announced further support measures for those experiencing financial hardship as a result of the economic fallout from COVID-19.
After liasing with the Government, most banks offered a six month deferral on home loan repayments if borrowers required it.
However, the loan still incurred interest in this time, which could extend the length of your loan and cost you in the long run.
Commonwealth Bank (CBA) Group Executive Retail Banking Services, Angus Sullivan, said the bank recognised this, and was commited to supporting Australian households through the crisis.
“When a home loan repayment is deferred for six months, interest is calculated and added to the loan balance each month which can result in customers paying interest on interest each month," Mr Sullivan said.
“To support more Australians, we will make a one-time payment to all customers who are receiving a home loan deferral because of the coronavirus."
Mr Sullivan said on an average loan of $350,000, CBA would be refunding approximately $45 to offset the effect of interest on interest over the six month period.
"Customer payments will vary based on their loan amount and interest rate," he said.
For reference, if you were a CBA customer and deferred your home loan for six months after borrowing five years ago, assuming you had CBA's standard variable rate of 3.08% p.a and a loan amount of $350,000 repaid over 25 years, your monthly repayments prior to the deferral would be $1,675.
After the six months, your monthly repayments would be $1,724, a difference of $49.
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| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
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6.04% p.a. | 6.08% p.a. | $3,011 | Principal & Interest | Variable | $0 | $530 | 90% | 4.6 Star Customer Ratings |
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6.09% p.a. | 6.11% p.a. | $3,027 | Principal & Interest | Variable | $0 | $250 | 60% |
| Promoted | Disclosure |
In addition to support for home loan customers, CBA announced support measures for credit card customers who were unable to make their minimum credit card repayment on time in March.
Any customer that missed their credit card minimum repayment in March, would automatically be refunded their late fees and interest for the month of March.
“This support is focused on customers who are finding it difficult to meet their current commitments before further Government stimulus arrives in April and May,” said Mr Sullivan.
CBA had previously announced support measures on 20 March that included:
- Offering existing and new home loan customers the ability to defer loan repayments for six months;
- 70 basis point interest rate reduction for home loans with one, two and three year fixed terms to 2.29%, available to both new and existing owner-occupiers on principal and interest repayments with a Wealth Package;
- 60 basis point interest rate increase on 12-month term deposits for personal customers to 1.70% p.a;
- Changes to minimum home loan repayments.
What support measures are other lenders offering?
The Australian Banking Association (ABA) announced in March all small businesses impacted by the unfolding coronavirus crisis will be able to access a six-month deferral of loan repayments to ease some of the pressure.
ABA CEO Anna Bligh said the package will apply to more than $100 billion of existing small business loans and could put as much as $8 billion back into the pockets of small businesses.
“This is a multi billion dollar lifeline for small businesses when they need it most, to help keep the doors open and keep people in jobs," Ms Bligh said.
NAB and ANZ then extended this offer to homeowners for six months, while ANZ did the same for three months.
NAB also announced reductions of up to 60 basis points to fixed rate home loans.
“These measures will provide significant relief to businesses and homebuyers over the next six months as we all deal with this unprecedented situation," said NAB CEO Ross McEwan.
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