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CBA introduces new IO process for brokers

by James Mitchell11 minute read
CBA, new IO process for brokers

The nation’s biggest bank has launched an interest-only simulator to help brokers show customers the differences between IO and P&I repayments.

In a note to brokers and aggregators this week, CBA explained that a new compulsory Customer Acknowledgement form will need to be submitted with all home loan applications that have interest-only (IO) payments to ensure that IO payments meet customer needs. This form is included within the tool.

The bank said that the information presented in the tool will help broker customers choose the repayment option that best suits their needs.

“Outcomes that should be considered include no reduction in principal while on IO, higher interest rates, and rollover to higher repayments at the end of the IO period,” the bank said.


“There are key benefits of P&I [principal & interest] repayments that mean this option will generally be suitable for most owner-occupier customers. These include lower interest rates on loans with P&I repayments; saving money by reducing the total amount of interest paid over the life of the loan; and paying down the principal from the beginning of the loan term, which helps customers build equity in their home.”

CBA said that brokers must complete the simulator for all customers who are considering IO payments irrespective of whether the customer chooses to proceed with them.

“Based on the information provided in the available fields such as loan amount, IO term and headline rate, the tool will show approximate total payments over the life of the loan for both IO and P&I repayments.”

The simulator contains a Customer Acknowledgement form detailing the considerations and outcomes of choosing IO payments. Brokers must provide customers with a copy of this form as a record of the discussion. They are also instruction to "click on the Save as PDF button to save the form, and attach it in an email to the customer".

These requirements will be mandatory for all brokers and will become effective on Monday, 9 October.

“Your application will not be assessed if the acknowledgement form is not included,” the bank said.

[Related: CBA boss apologises to brokers]


James Mitchell


James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.