Starting today, the Commonwealth Bank (CBA) will automatically switch 748,000 home loan customers onto the minimum repayments required to service their loans.
CommBank customers who are currently making more than the minimum repayments towards their mortgage will be moved to the minimum required between May 1-5, though those already paying the minimum will be unaffected.
While borrowers who wish to continue to pay more than the minimum will still be able to, they’ll only be able to from May 6 after contacting the bank or making the change themselves online.
According to the Commonwealth Bank website, the decision is part of a wider initiative to protect the financial wellbeing of customers and put more money back in their pockets during the COVD-19 pandemic.
“We're currently experiencing an unprecedented period of economic disruption, and it‘s important that we do our part to support our customers and communities through this difficult time,” as per the CommBank site.
“We've already seen the number of customers reducing their repayments to the minimum increase substantially in March, and this change will assist customers who may require access to the additional cash flow.”
However, the move has been also met by criticism, including thousands of complaints from Commonwealth Bank customers unhappy with the bank’s decision.
“I understand why some customers are frustrated at not having been given a choice up front,” said Mozo Banking Expert, Peter Marshall. “There’s no reason why the bank couldn’t have simply reminded customers who are paying more than they need too that they have the option of reducing their payments, rather than imposing a blanket change.”
“A lot of people will have made a conscious decision to pay their loan off faster than they need to. And if they have their eyes off the ball - which may well be the case at the moment - and they forget to switch back to their normal repayments, it could very well end up costing them.”
According to Mozo’s extra repayments calculator, paying an extra $100 a month on a $400,000 home loan (3.50% interest rate) over 25 years would result in the loan being paid off 22 months earlier and a saving of $16,403 in interest, compared to a situation where normal repayments were being made.
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