CBA slashes 5 year fixed rate to 7.25%.

Commonwealth Bank today announced a reduction in its five year fixed term residential mortgage from 7.70 to 7.25%, initially for a limited time until 12 December.

The rate is just 0.50% above the standard variable rate, and just over 1.0% above the CBA's no frill rate. CBA is offering the product to existing clients at the same rate with a switching fee of $150, plus break costs if applicable.

The rate easily undercuts other offers, and provides a real option to homeowners, both new and existing, between fixed and variable mortgages.

With mortgage rates at or close to the bottom of the current cycle, the option of fixing will be close to most homeowner's minds, and whilst fixed terms and rates reduce flexibility, this rate will rightfully tempt many to “lock in.”

The initiative is also likely to spark further competition as other lenders decide to match the CBA's offer in the run up to Christmas.