Commonwealth Bank voted the worst bank of major home lenders

Update: COMMONWEALTH gets the thumbs down on home lending but smaller players win in customer satisfaction.

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WHICH bank has been voted the worst home loan lender?

After seemingly endless months of bad publicity over the massive paypacket of its outgoing CEO and growing customer dissatisfaction over rate rises, it shouldn't be a surprise that the answer is the Commonwealth Bank.

The backlash has been so severe that the bank has gone straight to the bottom in the latest people's choice survey conducted by independent financial services comparison website Mozo.

The Commonwealth's home loans rating fell to 5.9 points, out of 10, from 6.7 points.

The drop in the Commonwealth Bank's ratings follows the bank's move to lift its rates on variable home loan accounts by 45 basis points on Melbourne Cup Day in November 2010, well above the Reserve Bank of Australia's (RBA's) cash rate hike of 25 basis points.

Last month the Commonwealth Bank dropped to the bottom of customer satisfaction ratings, costing outgoing CEO Sir Ralph Norris a whopping $7million paycut.

A spokesman for the Commonwealth Bank told news.com.au it wasn't surprising that the interest rate decision was a factor in home loan customer satisfaction levels.

However, he said it was worth noting this rise took place more than 10 months ago and that the bank had made massive inroads in increasing customer satisfaction since.

"More recently we have continued to improve customer satisfaction levels and for the last two months running recorded the highest customer satisfaction scores of the major banks in the monthly and more up-to-date Roy Morgan surveys" he said.

"This has seen the Commonwealth Bank move into third place and further bridge the gap with the leading bank."

Competitor ANZ fared slightly better, ranking the highest of the big four home lenders, scoring 6.7 points, while National Australia Bank scored 6.4 and Westpac 6.2.

Customers rated banks according to several factors including overall satisfaction, price, features, customer service, convenience and trust.

And it was the smaller players who got the most out of the survey - they remain the people's favourites.

Greater Building Society was named Australia's favourite home lender, scoring 9.4 out of 10, followed by ME Bank (8.8) and CUA (8.2).

In overall customer satisfaction, NAB's high-profile break-up advertising campaign appeared to reap rewards, helping the bank beat its big four rivals with a score of 7.1.

Westpac was second with 6.9, followed by Commonwealth and ANZ, which both scored 6.8.

ING Direct was named best bank, most trusted bank and most recommended bank, while ME Bank was recognised as offering the best customer service.

ING CEO Don Koch said the survey showed smaller lenders are proving to be strong competitors in the Australian banking sector, challenging the dominance of the Big Four.

“We’re particularly happy to be recognised with so many awards from those who matter most, our customers," he said.

"We’ve earned the trust and respect of Australians and we’re incredibly proud of that. We’ve been consistently offering simple, great value products to Australians for 11 years and these awards acknowledge we hold a firm place in the hearts and minds of our customers."

Mozo managing director Rohan Gamble said competition returned to the banking sector in 2011, illustrated by a step-up in marketing.

"While these stunts certainly grabbed the headlines, customer satisfaction is driven by actions, not marketing," he said.

"The NAB's axing of penalty fees, ING Direct's consistently competitive interest rates and the Greater's commitment to people before profits have made them the big winners in customer satisfaction."

- With AAP