There are now 34 lenders offering home loan cashback deals – a new record high, with deals for the average-sized mortgage of up to $5,000, according to data from RateCity.com.au.
This is almost three times the number available at the start of the COVID pandemic, when refinancing was gaining momentum.
Deals range from $888 up to $5,000 for average mortgages.
However, for those borrowing a more hefty sum, Citi offers $6,000 via a broker for loans of $1 million or more, while Reduce Home Loans offers $10,000 cashback on loans of $2 million or more.
Most of the cashback offers are for refinancing only, not for new loans. All of the major banks are offering deals.
“With refinancing booming in recent years, cashbacks are an increasingly popular perk being offered by lenders to attract new business,” RateCity said.
“The latest ABS lending indicator figures show $17.93 billion worth of loans were refinanced in July, just below the June record high.”
How do the Big Four banks stack up?
Calculations are based on a $500,000, 25-year loan.
Rate (post-Sept RBA hike)
Difference in cost to lowest variable over 2yrs
Av. existing customer
3.99% for 2 yrs then 4.39%
RateCity.com.au analysis found a borrower on the average existing owner-occupier variable rate - estimated to be 5.11 per cent by the end of this month - would come out ahead on all of the 34 cashback home loan specials.
RateCity.com.au research director Sally Tindall said the refinancing market was “swimming with sweeteners” with the number of cashback deals hitting a new record high.
“The rise in refinancing is prompting the banks to throw large sums of cash at the feet of anyone willing to switch,” Tindall said.
“However, borrowers should be aware these deals can sometimes come at a cost.
“Free cash might be tempting, particularly at the moment but, unless you switch to a new loan with a competitive rate, it could end up costing you thousands of dollars more in interest over time.
“You have to have your wits about you if you’re planning on playing the cashback game.”
7 things to check before refinancing
Is the interest rate competitive? Under 4 per cent will be a competitive variable rate for owner-occupiers, with about a dozen lenders expected to have a variable rate under 4 per cent
Read the terms and conditions carefully. Make sure you’re eligible for the cashback
Are the fees high? Ask the new lender to waive them if they are
Does the loan offer the flexibility you need? This may include an offset account or the ability to make extra repayments
Are you in position to refinance? This typically includes having a steady job, owning at least 20 per cent of your home and that you’re not currently on a fixed rate, as break fees may apply
Can you put the cashback bonus into your mortgage? Extra repayments help reduce your interest charges over the years to come
Refinance regularly: Don’t set and forget your loan, especially if you are on a fixed loan, as potentially high revert rates may quickly eat away at any savings you’ve made