Homeowners opt to stay ahead on loans amid economic uncertainty
Only a small proportion of eligible Commonwealth Bank (CBA) mortgage customers adjusted their home loan repayments after the Reserve Bank of Australia’s interest rate cut in May, according to new figures released by the bank.
CBA data shows that just 10% of eligible borrowers chose to reduce their direct debit repayments following the 0.25% cut to the official cash rate. This mirrors customer behaviour after the previous cut in February, when a similar share took action in the early weeks following the decision.
Customers in New South Wales made up the largest share of those who reduced their repayments, accounting for 39% of the group, followed by Victoria at 31%. As a percentage of eligible customers within each state, NSW also saw a slightly higher response rate, with 13% of eligible borrowers in the state making changes.
Australians aged between 31 and 50 were the most likely to reduce their repayments. The bank also reported a higher rate of repayment reductions among customers with investment loans compared to owner-occupiers.
Despite more customers becoming eligible to make changes after the May decision, the overall proportion choosing to do so has remained unchanged since February. Across both rate cuts, which together lowered the cash rate by 0.50 percentage points, borrowers with a $500,000 loan could potentially save around $160 per month on principal and interest repayments.
The release of this data comes ahead of the RBA’s July interest rate decision, to be announced later today, with markets widely expecting another cut to the official cash rate.
Tess Sutherland, CBA general manager of home buying, said the data shows that most borrowers are choosing to maintain their higher repayment levels despite the potential savings.
“One in 10 eligible customers opted to lower their home loan repayments after the May rate cut, which is really similar to what we saw following February’s cut,” said Sutherland. “It shows only a small percentage of customers are freeing up their cash, while most are maintaining higher repayments to get ahead on their loans.”
Sutherland said customers are informed of their repayment options and can make changes easily via the CommBank app or NetBank.
“In a state like NSW, where property prices are the highest in the country, it makes sense more customers are choosing to ease financial pressure by adjusting their repayments. It’s a practical way to create breathing room in the budget,” she said.
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