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25 lenders offering up to $5,000 to switch mortgages

(Source: Getty)
(Source: Getty) (Getty Images/iStockphoto)

Dozens of lenders are offering Aussies cashback deals of up to $5,000 to charm over new customers and convince existing mortgage holders to refinance.

New data from RateCity has found that 25 lenders are offering between $1,000 to $5,000 cashback, with 21 of these lenders offering rates under 2 per cent.

And it’s not just small, boutique lenders who are employing the tactics; each of the four Big Banks have cashback deals, too.

Competition from lenders has heated up in the past several months thanks to record-low rates, with $151 billion in home loans being refinanced over the last 12 months alone.


Also read:

Fixed rate: Save $1,695

Currently, the lowest 2-year fixed rate on the market is Greater Bank’s 1.79 per cent.

The average Australian variable rate customer with an average mortgage of $500,000 who refinances to this rate can stand to save up to $12,505 in the first two years, according to RateCity.

But if they go with the lowest 2-year fixed rate also offering $3,000 cashback (ING’s 1.84 per cent), they would be able to save $14,200, which is an extra $1,695 back in the pocket.

Variable rate: Save $102

However, if you’re on a variable rate, it may not necessarily be worth switching at all. RateCity analysis reveals that switching to the lowest variable rate on the market (Reduce Home Loans’ 1.77 per cent) could save you $11,710 in two years.

But if you go with HSBC’s cashback deal, with the variable rate of 2.19 per cent, you would only pocket an extra $102 in the first two years.

Cashback is getting popular – but be careful

Cashback has now become a popular perk being offered by an increasing number of lenders, said research director Sally Tindall.

“A low ongoing rate used to trump a one-off perk such as a cashback, almost every time, but banks are now increasingly offering both low rates and cashback deals,” she said.

For someone who is willing to hunt for the best deals and refinance regularly, cashback deals could potentially work in your favour, Tindall said.

But this isn’t for everyone, she also warned.

“However, anyone who doesn’t look past the lure of instant cash could potentially shoot themselves in the foot if they’re not careful.

“It all comes down to your personal circumstances, including the type and size of your loan, the rate you’re switching to, any fees, and whether you’re likely to refinance regularly.”

“If you’re thinking about taking out a cashback deal, do the maths to make sure you’re going to end up ahead when compared to the lowest rates available,” she said.

Thinking about refinancing to a cashback deal? Here’s your checklist

  • How competitive is the interest rate? Currently, the lowest variable rate is 1.77 per cent and the lowest 2-year fixed rate is 1.79 per cent, according to RateCity.

  • Are you even eligible for the cashback? Be sure to read through the terms and conditions.

  • Are you in a good position to refinance right now? Consider how steady your employment is and whether you own at least 20 per cent of your home. If you’re on a fixed rate, you might be facing break fees.

  • Can your cashback money be put back into the mortgage? You can always reduce your interest through extra repayments.

  • How high are the fees? If they’re high, you could try asking your new lender to waive them.

  • Will this deal still look as good in a few months? The great rate you’re getting likely will disappear after a few months, so if you ‘set and forget’,

Here’s the full list of 25 lenders with cashback deals:

(Source: RateCity)
(Source: RateCity)

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