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Unloan: 6 things you need to know about CBA's digital home loan

Unloan: 6 things you need to know about CBA's digital home loan

Commonwealth Bank of Australia has today announced the availability of its new digital home loan, Unloan, as part of its latest strategy and investments to ‘reimagine banking’.

Unloan, the new digital home loan from Australia’s biggest bank, offers eligible customers an interest rate of:

  • 2.14% (comparison rate 2.06%) for owner-occupiers, and
  • 2.44% (comparison rate 2.36%) for investors.

In terms of who is eligible, the new digital home loan is currently available to refinancers only that have paid off at least 20% of their home loan, with a property value cap of $3 million. The digital-only home loans will offer a redraw facility but no offset account, and it will not be available through mortgage brokers.

So, what makes this new digital home loan offer stand out and what does it mean for Australians considering refinancing?

1. It’s a world first digital home loan

By simplifying the Unloan home loan offer to one variable option for owner-occupiers and one variable option for investors, CommBank has suggested this is a world first digital home loan.

As it is being targeted as a simple loan not for “complex situations”, the repayments are only being offered as principal and interest, with no interest-only repayments or honeymoon rates on offer. Customers will simply need to ensure they meet the strict eligibility criteria to qualify.

2. You may get a loyalty discount

Approved customers are set to experience a ‘loyalty discount’ of 0.01% every year, up to 30 years. This equates to a discount of 29 basis points over the typical life of a loan.

And given that all the big banks have forecast that interest rates are expected to rise over the next two years, a guaranteed rate discount may be a competitive offer for some customers.

RateCity research shows there are only two other lenders on its database offering a loyalty discount for customers, Athena and OneTwo Home Loans.

Matt Comyn, CEO, CommBank said in a briefing today that the design of the pricing construction with this online loan was a “very conscious choice” as the loyalty discount means the product will “get better over time”.

“There’s nothing that says a customer should refinance their home loan five times over 15 or 18 years, or however long it takes you to actually pay off your loan,” said Mr Comyn,

“There’s a lot of cost in that process, and there’s a lot of time involved from customers to go to their lender or broker and go through that process… [and] the heart of what customers want is that they want a simple product that takes care of itself over time,” he said.

3. 10-minute application process

One of the biggest draws of a digital home loan is a streamlined application process, and the digital home loan offer from Unloan promises customers it should take “as little as ten minutes” to complete.

Further, in a briefing today for CommBank, it was revealed Unloan is aiming to offer customers information on full approval in only ten minutes as well. This will take longer to roll out over the next twelve months, but “applying in ten minutes to get approved in ten minutes” has been regarded as the goal for Unloan.

Typically, the process of a lender reviewing your home loan application and waiting to hear about approval can take several hours, to multiple business days, depending on the lender. A customer gaining same-day full approval in only ten minutes would position Unloan as offering one of the faster approval times available.

4. Facial recognition to verify your identity

In terms of how a digital home loan application works, eligible customers will simply need to jump online and:

  1. Add their property details
  2. Add their personal details, including any other borrowers on the loan
  3. Add their income, expenses, and existing loans or credit card details
  4. Set up their home loan
  5. Verify their identity using facial recognition technology
  6. Upload any relevant documentation, such as pay slips or banking statements

5. Built to move at the pace of fintech

One of the downsides of choosing a big four bank has often been the delay in rolling out innovative fintech. While many customers still rely on face-to-face customer service, following Covid-19 Australians may be looking for even more online-based financial products.

Unloan has been built to move at the pace of a fintech, while benefiting from the back-end banking, payments and compliance services of a big bank.

Matt Comyn said: “Driving digital innovation for our customers – including the delivery of distinct and differentiated customer experiences – is core to CBA’s ongoing strategy.”

“Unloan is a powerful example of what can be achieved by successfully bringing together the pace and innovation of the startup world with the scale and assets of Australia’s leading bank, which has always been central to our approach with x15,” he said.

6. Fewer overheads means lower rates on average

Online-based lenders have often been able to get a competitive edge over the big four banks in terms of passing on savings to their customers by having lower overheads. Unloan is set to compete in this space by being entirely digital, allowing it to offer a more competitive variable rate than other CommBank home loans.

Daniel Oertli, CEO, Unloan said: “We believe home loans should be simple to understand, easy to get, and easier to live with.”

“That’s why we built Unloan – a new kind of home loan designed to pass more value back to customers. We have a low variable rate, an ever-increasing discount, and an easy online application.”

How does Unloan compare to its competitors?

According to the RateCity database, there are currently only six lenders offering variable home loan rates lower than 2.14% for owner-occupiers paying principal and interest. This positions Unloan as a competitive option for refinancers to consider.

Lowest rate variable owner-occupier loans (principal and interest)

LenderLoanInterest rate

(after RBA May hike)

Comparison rate
1Homestar FinanceStar Gold

1.79%

1.84%

2Pacific Mortgage GroupStandard Variable Home Loan

1.99%

1.99%

3Reduce Home LoansSuper Saver

1.99%

2.08%

4Freedom LendFreedom Variable

1.99%

2.03%

5Well Home LoansWell Equity Plus

2.07%

2.10%

6One TwoVariable Home Loan

2.09%

1.99%

7UnloanNew Owner-Occupier Loan

2.14%

2.06%

Source: RateCity.com.au, data accurate as of 17/05/22.

For investors, RateCity’s database shows that only three lenders are offering more competitive interest rates for variable home loans paying principal and interest

However, as not all lenders have announced whether they are or are not passing on the latest Reserve Bank of Australia cash rate hike to variable customers, this may be subject to change.

Lowest rate variable investor loans (principal and interest)

LenderLoanInterest rate

(after RBA May hike)

1Homeloans.com.auLow Rate Home Loan Prime

2.29%

2.29%

2Freedom LendFreedom Variable Investment Loan

2.29%

2.33%

3Pacific Mortgage GroupStandard Variable Investment Loan

2.29%

2.29%

4UnloanNew Investor Loan

2.44%

2.36%

Source: RateCity.com.au, data accurate as of 17/05/22.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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