In the biggest salvo yet to be fired in the bitter stoush, the CBA has unveiled the loan vowing to charge "no bank fees at all" including the controversial exit fees soon to be outlawed.
With an interest rate of 7.24 per cent, the home loan is priced significantly below the standard variable rates offered by all the other majors.
The bank, Australia's biggest home lender with a $290 billion mortgage book, said the product was unheralded in Australia and intensified competition in an "already competitive" market.
Industry experts said it was the most tangible sign yet that competitive tensions were stretching to breaking point and that the banks were moving beyond promotional gimmicks in their battle for custom.
One industry source said it signalled that the CBA was not prepared to surrender any more market share to smaller rivals National Australia Bank and ANZ.
"The empire strikes back," he said.
NAB unleashed the war two weeks ago with an offer to pay the exit fees for home loan customers who switched from Westpac and the CBA.
A week later, Westpac retaliated with an offer to pay switching fees for any business customers that joined the bank, while the CBA waved $1200 cash in front of NAB customers willing to jump ship.
Among the major banks, NAB is market leader for traditional standard-variable home loans with an interest rate of 7.67 per cent, while Westpac is the most expensive at 7.86 per cent.
ANZ charges 7.8 per cent, while the CBA's traditional loan is priced at 7.81 per cent.
But the new CBA home loan threatens to redraw the competitive landscape.
It has no monthly or annual fees and no late payment charges, but customers cannot split the loan locking in part of the loaned amount at a separate rate for a fixed term.
Customers with a traditional standard-variable mortgage at CBA will pay no fees to change to the new home loan.
A home buyer with a $300,000 mortgage on a standard CBA home loan would save more than $110 every month in interest payments alone by changing to the product.
CBA retail chief Ross McEwan said the fee-free loan had been in development for months and had not been unleashed because of NAB's aggressive bid to poach customers.
But the launch had been brought forward "a couple of weeks", Mr McEwan said.