Commonwealth Bank customers could end up paying tens of thousands of dollars more on their home loans because of changes to repayment levels, a financial expert warns.

A financial expert has warned bank customers could end up paying tens of thousands of dollars more on their home loans because of a change to repayment levels by the Commonwealth Bank.
Key points:

• The CBA is dropping home loan repayments for 750,000 customers
• It is one of several changes made in response to the COVID-19 pandemic
• But financial experts say some people will end up paying far more interest

From tomorrow, the Commonwealth Bank (CBA) will automatically drop about 750,000 customers’ home loan repayments to the minimum amount.
The bank sent an email last week advising of the change and said customers must opt out if they wanted to continue to make repayments over the minimum amount, but told them they could not do so until May 6.
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Financial Counselling Australia chief executive Fiona Guthrie said the moves would see people who were ahead on their debt end up paying far more interest and be locked in for longer.
“Some people are going to miss that [CBA] email they might just dismiss it as another piece of marketing from a bank, and they won’t know what’s happened until it’s too late,” Ms Guthrie said.
The Commonwealth Bank has received around 2,600 complaints about the move.(ABC News: Greg Pollock)
“By the time they do find out, which could be couple of weeks, a couple of months or even later, it means that you’ll end up paying more and the loan will take longer to pay off.
“It can be substantial, it could be tens of thousands of dollars for some people.”
Ms Guthrie said the banks should not be taking a “one size fits all” approach.
“I don’t actually want to be critical of the Commonwealth Bank or the banking industry because they’re doing a lot of really good things here, and they’re trying to be helpful,” she said.
“[But] this may not have been the right decision.
“Your house of course is your biggest asset and it’s often really sensible, if you can afford to pay more than minimum repayments, to do that.”
‘It’s about the shareholders’
Commonwealth Bank customer Brooke O’Donnell said she was disappointed by the move.
Brooke O’Donnell has three mortgages with the Commonwealth Bank.(ABC News: Rebecca Trigger)
“I have two children and I have already a really extensively laid out budget, everything’s already organised to a T,” she said.
“The money that I have left over is money that I spend on things that I need.
“I don’t think it’s about the customers, it’s about the shareholders and their profits and trying to continue their loans and to try to decrease the amount of people that are taking advantage of the low interest rates now. It’s really sad.”
A Commonwealth Bank spokesman said the move would release an average of $400 a month for customers and inject up to $3.6 billion cash into the economy over a 12-month period.
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The move was initially flagged by CBA on March 19 as one of a number of measures introduced in response to the declaration of a global pandemic.
It was also and a week and a half before the Federal Government unveiled its JobKeeper package on March 30.
The spokesman said the move would affect about 748,000 customers out of its 1.7 million home loan borrowers.
‘Unprecedented circumstances’ prompt change
According to the bank’s December half-year results, the latest comprehensive data available, 34 per cent of borrowers were less than one month ahead on their repayments.
Some 52.7 per cent were six months ahead, while 32.3 per cent had a more than a two-year buffer.
Financial counsellors fear some people may end up paying too much interest on their home loans.(Reuters: David Gray)
“Over the past couple of months, and in particular since the coronavirus pandemic was declared, we have been contacted by hundreds of thousands of our customers seeking help and financial relief, particularly from those people who have been stood down by their employers or have lost their jobs,” a statement from CBA said.
“This has had a significant and substantial effect on their income.
“As a consequence, we have announced several measures to support our customers including moving nearly three-quarters of a million of home loan borrowers to the monthly minimum repayment amount.
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The statement said the bank had received about 2,600 complaints about the move, representing about 0.35 per cent of affected customers.
People who wish to change their repayments back can do so via the CommBank app or Netbank from May 6, or by contacting a Commonwealth Bank call centre, the statement said.
“Based on the volume of responses we have received to date at 0.35 per cent, it is fair to interpret that the vast majority of our customers understand the proposed change, and that it is a one-off change that is in place due to the unprecedented circumstances from the coronavirus,” the bank said.
“We do understand that this decision does not suit all of our customers and appreciate that we may have caused some of them an inconvenience.
“For those customers who have contacted us directly before April 30 and who are not able to utilise the repayment change options, we have been able to exclude selected customers from the change.”
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