Concerns regarding Commonwealth Bank home and investment loans have been increasing since the beginning of the financial year.
There have been three major issues that directly affect our ability to recommend Commonwealth Bank to our new and returning clients.
Issue 1 – Product switches wait times up to six months
Investors with interest only loans that wish to extend their interest only term are being met with wait times of up to six months. For many clients, the increased wait time dramatically affects their cash-flow and the profitability of their investment properties. If your interest only term will expire in the next two months, we recommend contacting us to organise an alternative to Commonwealth Bank.
Issue 2 – Charging customers extra for insurance
Many lenders offer consumer credit insurance (CCI) to people who take out loans to cover repayments in the event that they become unemployed or are unable to make their usual repayments. Commonwealth bank has been found to have sold more than 65,000 policies to borrowers who were unlikely to need this type of insurance. ASIC deputy chair, Peter Kell, said that “Consumers should not be sold products that provide little or no benefit, and banks should have processes in place that ensure this.”
If you have bought CCI through the Commonwealth Bank, please contact them to see if you are entitled to a refund.
Issue 3 – Stricter lending policies
Increased pressure from APRA has resulted in many policy changes to both owner-occupied and investment home loans offered by the Commonwealth Bank. Investment interest rates have climbed to their highest position in three years and discounts for large loans have been reduced. The combination of higher interest rates and stricter lending policy has resulted in all types of loans being less likely to be approved.
Commonwealth Bank has recently been involved in major non-reporting issues that may have led to money laundering or terrorism financing activities. While this doesn’t directly affect our clients, we are of the opinion that banks should be held to a high standard to ensure their compliance with anti-money laundering and counter terrorism financing legislation.
For the above reasons, we have downgraded Commonwealth Bank as a potential supplier of home and investment loans for new and returning clients.