CBA launches direct-to-consumer refinance product

The Commonwealth Bank of Australia (CBA) is preparing to introduce a new digital home loan product aimed at new borrowers, accessible only online.

Scheduled for release later this month, the product aims to offer borrowers (who are refinancing away from another lending institution) a lower interest rate than they would be able to access via broker or proprietary channels.

It is believed that the refinancing product will be for new-to-bank customers with a loan-to-value ratio under 80 per cent.

While CBA already has a digital-only direct-to-consumer division called Unloan, which bypasses brokers and branches, this new offering is the bank’s first “yellow-branded” mortgage that is exclusively direct-to-consumer.

Existing CBA home loan customers will not be eligible for the new digital product.

CBA had not issued a comment or further details of the new product at the time of writing.

The move to launch a new direct-to-consumer product under the CBA brand is believed to be part of the bank’s strategy to expand its mortgage portfolio and increase home loan margins.

Over the past year, Australia’s largest lender has focused on proprietary distribution, saying that broker loans yield lower margins. (And broker flows have been falling in the past few years, with the latest financial figures showing that the third-party channel writes around a third of its mortgage business.)

However, with CBA’s retail banking margins having dropped by 25 bps in the first half of 2024 compared to the second half of 2023 (falling to 254 bps), the bank has been looking at new ways to improve overall profitability.

Speaking on the Mortgage Business Uncut podcast, Momentum Markets’ managing editor for consumer finance and real estate Phillip Tarrant said that the move may represent “generational thinking on behalf of CBA” and the “beginning of the end of the proprietary branch network”.

He said: “The broker channel ain’t going to go away ... [but] maybe it’s the beginning of the end of the proprietary branch network. Maybe that’s what’s on the chopping block here.

“In 20 or 30 years’ time (and if the technology keeps up), most people that are happy to go direct will do it digitally with CBA. So this could mark the beginning of the end of the proprietary branch network.”

You can find out more about the CBA move in the breaking news Mortgage Business Uncut podcast episode, below:

[Related: CBA hikes bonuses to stop bankers from becoming brokers]