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Commonwealth Bank drops home loan rates

Commonwealth Bank branch. Australian money.
Commonwealth Bank has cut its variable home loan rates for new customers. (Source: Getty)

Commonwealth Bank has lowered its basic home loan rates for new customers, as Aussies brace for another interest rate rise next week.

Australia’s biggest bank cut the variable rate on its Extra Home Loan by 0.07 per cent to 4.62 per cent for customers who own at least 30 per cent of their home (70 per cent loan-to-value (LVR) ratio).

The major bank also sliced interest rates for borrowers who own a smaller proportion of their home by 0.20 per cent, bringing the rate to 5.44 per cent for customers with a 80.01 to 95 per cent LVR.

The move comes days after rival ANZ cut its basic home loan rates and almost two weeks after Commonwealth Bank slashed its package home loan rates.

RateCity research director Sally Tindall said the big banks were cutting rates to attract borrowers looking to refinance.

“This kind of competition is fantastic for proactive borrowers willing to throw their weight around,” Tindall said.

“If you’re an owner-occupier with a decent amount of equity in your loan, you are a valuable asset to the bank. Use this to get a better deal.”

Fixed rates climb

Commonwealth Bank also announced changes to many of its fixed rate home loans, the majority of which were increases.

It included a 0.20 per cent hike to its 2-year fixed rates and a 0.60 per cent increase to its 4-year fixed rates. On the flipside, the major bank lowered its 3- and 5-year fixed rates.

NAB also made changes today, hiking its 1- and 2-year fixed rates by up to 0.30 per cent.

Fixed rates continue to remain a mad gamble, with little clarity on exactly how high the cash rate will go,” Tindall said.

“If you do decide fixing is right for you, focus on what’s in your control, which is finding a competitive rate.For anyone wanting to hedge their bets, a split loan can be a good way to have a foot in both camps.”

The Reserve Bank is expected to hike interest rates by 0.25 per cent when it meets on Tuesday. But economists are divided on what rate changes will come next year.

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