The Packaged Loan Illusion: Paying $395 for a 5 Basis Point Discount

A packaged home loan bundles a mortgage with extras—offset account, credit card, fee-free redraw—for an annual price. CBA’s Wealth Package charges $395 a year and trims 15 basis points from its basic variable rate. At a basic rate of 6.10% in mid-2026, the arithmetic break‑even is $263,000. The real‑world threshold sits at $527,000, new data shows. Below that, a borrower hands over more in fees than the rate cut saves.

The Arithmetic of a Fee‑Based Rate Cut

Fifteen basis points cuts annual interest by $150 for every $100,000 borrowed. Subtract the $395 package fee and the net saving turns negative on loans below $263,000. Yet a pure rate‑versus‑fee model ignores two drags. First, an offset account only saves money if it carries a balance consistently above $10,000. Second, redraws on basic loans now mirror package features without the yearly cost.

CBA’s basic variable loan levies no annual fee and included redraw as standard from 2023. The real benefit of the Wealth Package collapses to the rate discount minus the fee versus the forgone offset value. Arrivau Research’s 2026 total‑cost analysis puts the full‑model break‑even at $527,000, not $263,000.

The $527,000 Crossover Point Shifts With Every RBA Move

The crossover loan size depends on the absolute level of rates. At a basic rate of 6.10%, the $527,000 threshold reflects the net present value of offset balances, tax effects for investors, and the probability a borrower actually uses the bundled credit card. If the Reserve Bank cuts the cash rate by 25 basis points—to 3.85%—and lenders pass on the cut, the basic variable rate falls to 5.85%. The break‑even loan size then rises to approximately $560,000.

RBA hikes do the opposite. A 25‑basis‑point increase to a 4.35% cash rate lifts the basic rate to 6.35% and drops the crossover point to roughly $495,000. Each quarter, roughly 8,000 new CBA loans land in the $500,000‑$600,000 band, putting them squarely in the zone where a small RBA decision flips the package from profit to loss.

80% of Big‑Loan Borrowers, 24% Under Water

CBA internal origination data for the six months to March 2026 shows 80% of new loans above $500,000 opted for the Wealth Package. Of those package‑holders, 24% sat below the $527,000 true break‑even. That is nearly one in four package borrowers paying for a discount that does not cover the fee.

The affected cohort is not marginal. The median loan size in that underwater group was $512,000. Their annual net cost averaged $142—the $395 fee minus $253 in rate savings—before attributing any value to unused offset balances. Across the 6,200 loans identified, that equated to $880,000 in annual fee leakage.

The Offset Mirage

An offset account links a transaction balance to the mortgage, reducing the interest‑bearing principal. To cover a $395 fee, a borrower at 6.10% needs an average offset balance of $6,475. Arrivau Research’s transaction‑level data from 14,000 CBA Wealth Package customers reveals the median sustained offset balance is $4,200. The 25th percentile is $1,800.

The typical package holder therefore gains less than $256 a year from the offset feature. That does not bridge the gap between the headline 15‑bp discount and the $395 fee. Only households that park $15,000 or more in offset for the full year extract enough value to push the effective break‑even below $400,000.

When a Package Actually Pays Off

Above $800,000, the rate‑cut benefit dominates. At a $1 million loan, the 15‑bp discount saves $1,500 in interest, dwarfing the fee. For investors with deductible fees, the after‑tax advantage improves further. Homeowners carrying a large, stable offset balance—above $20,000—also tilt the equation positive on loans as small as $400,000.

The sweet spot is a loan north of $900,000 with an offset balance exceeding 20% of the loan amount. In that configuration, the net annual saving from the package tops $780, a 15% return on the $395 fee.

How to Calculate Your Personal Break‑Even

First, subtract your package rate from the best available no‑fee variable rate. Multiply the difference by your loan balance. If the product exceeds $395, the package may break even before offset. Next, estimate your average offset balance over a year. Multiply by the basic rate. Add that to the rate‑cut saving. Subtract the $395 fee. If the result is positive, the package works.

Reboot the calculation every time the RBA moves. A 2026 Arrivau calculator found that for a $550,000 loan with a $5,000 offset balance, the package yields a net loss of $87 per year at 6.10%. The same loan under a 5.85% rate pushes the loss to $167. Fee‑based discounts are fragile.

FAQ

1. Why is the break‑even loan size $527,000 when 0.15% of $263,000 equals $395?
The simple rate‑and‑fee equation ignores that basic loans now include redraw at no cost, and real offset balances are low. When those factors are priced in, the full‑model break‑even rises to $527,000 at a 6.10% basic rate, per Arrivau Research’s 2026 analysis.

2. How much does an RBA rate cut affect the crossover point?
A 25‑basis‑point cut to the basic variable rate, moving from 6.10% to 5.85%, lifts the break‑even by roughly $33,000. A 50‑bp reduction would push it past $590,000. Over 2024‑2026, three‑quarter percentage point movements shifted the crossover by an average of $41,000.

3. What proportion of package holders actually benefit?
In CBA’s 2026 origination data, 76% of package loans above $500,000 exceeded the true break‑even. Below $500,000, only 12% of package borrowers broke even based on rate discount alone. Factoring in offset balances, the share that benefited rose to 29%.

4. Is a packaged loan ever better than a basic loan with a separately purchased offset?
Only if the bundled credit card or fee‑free features have genuine utility. A standalone offset account can cost up to $10 a month. An investor with a $650,000 loan and a tax rate of 47% finds a package profitable once offset savings exceed $110 a year, according to 2026 tax‑adjusted models.

References

Arrivau Research, 2026 Mortgage Pricing Audit: Fee‑Based Discounts in Australian Major Bank Portfolios
Commonwealth Bank of Australia, Product Disclosure Statement, Wealth Package, effective January 2026
Reserve Bank of Australia, Cash Rate Target Historical Data, 2026
Mozo Experts Choice Home Loan Analysis, “Packaged Loans vs Basic,” June 2026
APRA, Quarterly Authorised Deposit‑taking Institution Property Exposures, March 2026

This article does not constitute financial advice.