192views
While the banks have been fighting to raise rates for a while, it’s now a full-scale war between the bankers and the mortgage brokers.
Lenders try to convince customers to switch to them by offering cashback sweeteners of up to $4000.
But is it worth it?
There are currently 27 lenders offering cashback deals ranging from $1000 to $4000. These offers are only for mortgage refinancers.
This is more than the 12 institutions offering cashback in February prior to the pandemic. It’s also the largest number. RateCityHas ever seen.
It may seem smart to switch banks and make $4000, but you could end up in worse financial condition within a year.
RateCity analysts discovered that a homeowner who owes $500,000 on their home loan could restructure to a major bank using the lowest interest rate loan. They would be ahead of Westpac in two years, but they would fall behind the other three banks the second year.
Two-year fixed rates are much more likely to win than cashback bonuses.
Lenders offer home loans cashback for loans up to $500,000
| Big Four bank | Type | Cashback | Variable rate advertised at lowest |
| CBA | Refinance | $2000 | 2.79% |
| Westpac | Refinance | $3000 | 2.19% |
| NAB | Refinance | $2000 | 2.69% |
| ANZ (through Broker | Refinance | $3000 | 2.72% |
(All rates are current variable rate, except Westpac or GMCU which are introductory rates loans. These loans may not be available to everyone.
Sally Tindall (RateCity research director) states that a low continuing interest rate will typically outweigh signing up for a rate. This is especially true when the tides shift.
Bank sign-up specials are becoming more attractive and cost-effective.
“Someone who refinances every couple of years to a competitively priced loan, and knows how to haggle on fees, could potentially come out on top taking up a cashback special.
It can be quite different over the course of the loan’s life. A low rate is almost always better than a perk. This can often be by thousands of Dollars. Do not be lured by the promise of receiving cold hard cash. To determine if it will make your competitor richer or more successful, you need to do the math.
The best advice is to be specific about what you want from your loan.
Lenders offer home loans cashback for loans up to $500,000
| Other lenders – according to cashback size | |||
| St George | Refinance | $4000 | 2.59% |
| Bank of Melbourne | Refinance | $4000 | 2.59% |
| BankSA | Refinance | $4000 | 2.64% |
| Illawarra Credit Union | Refinance | Up to $4000 | 2.85% |
| Suncorp | Refinance | Up to $4000 | 2.68% |
| Bank First | Refinance | Get up to $3000 | 2.84% |
| Credit Union SA | New loans & refinance | Get up to $3000 | 2.59% |
| BOQ | Refinance | $2500 | 2.59% |
| Virgin Money | New loans & refinance | $2500 | 2.60% |
| Orange Credit Union | Refinance | $2020 | 2.89% |
| 86 400 | Refinance | $2000 | 2.59% |
| BankVic | New loans & refinance | $2000 | 2.74% |
| CUA | Refinance | $2000 | 2.73% |
| GMCU | FHB gets new loans | $2000 | 2.97% |
| MyState Bank | Refinance | $2000 | 2.69% |
| Newcastle Permanent | Refinance | $2000 | 2.59% |
| People’s Choice Credit Union | Refinance | $2000 | 2.69% |
| RAMS | New loans & refinance | $2000 | 2.59% |
| Reduce your home loan | New loans & refinance | Up to $2000 | 2.39% |
| Police Bank | New loans & refinance | Up to $2000 | 2.79% |
| The Capricornian | New loans & refinance | $2000 | 2.99% |
| Homestar Finance | Refinance | As high as $1500 | 2.29% |
| QBank | New loans & refinance | $1500 | 2.74% |
(All rates are current variable rate, except Westpac or GMCU which are introductory rates loans. These loans may not be available to everyone.
If the home loan you’re interested in is a good match for your needs and has a perk then great! Ms Tindall says that if you’re only looking for home loans because of the perk, it is likely that the bank has taken over marketing.
Cashback deals are often targeted at those who are considered more stable borrowers.
Refinancing can be tricky, especially for those who are self employed. Cashback offers are appealing because of this.
Adam Kennedy won. He refinanced the loan with a broker, secured a lower rate, and also received a $4000 payment via NAB.
A father-of-2 who owns an advertising agency claims that lower rates in June motivated him to change, but that he was only able do so after cashback offers became available.
Kennedy stated, “It really does pay to look around.” Kennedy stated that he is also time poor and has been guilty of overpaying but not refinancing in his past.
“There is always money to be saved.
“We were able obtain a lower rate than what we were receiving, and we also received cash back. There was no reason to not do it. We did it.
RateCity suggests that you do the following before refinancing in order to get a cashback offer:
- Is the interest rate competitive?There are 10 lenders that offer rates lower than 2 percent.
- Please carefully read the Terms and Condition.. You must verify that you are eligible to receive cashback
- Are these fees too steep?Ask the lender to remove them if they are.
- Is the loan flexible enoughThis could include an offset account and the possibility of additional payments.
- Is it possible to refinance your homeThis could be a stable job, or a high amount equity in your house.
- Is it possible to use the cashback bonus for a mortgage paymentBy making additional repayments, you can reduce interest rates over the years.
Are cashbacks worth it?
Variable rates – Refinance with the lowest rate lender
| Bank | Rate | Cashback | After 2 years, the difference is to zero | After 3 years, the difference to lowest | After 5 years, there is a significant difference between the lowest and the highest. |
| CBA | 2.79% | $2000 | $4282 | $7225 | $12,896 |
| Westpac | 2.9% Intro 2 year, then 2.9% | $3000 | -$2804 | -$388 | $4266 |
| NAB | 2.69% | $2000 | $3,099 | $5566 | $10,315 |
| ANZ | 2.72% | $3000 | $2,544 | $5154 | $10,179 |
| St George
Bank of Melbourne |
2.64% | $4000 | $872 | $3101 | $7390 |
| Lowest rate | 2.17% | $0 | $0 | $0 | $0 |
Based on an owner-occupier paying principal, interest and the loan for five years. Then, he/she switches to a 30-year loan of $500,000 with $500,000 remaining. Rates are calculated using a 70% LVR. Rates are calculated using the amount of interest paid and fees. (Discharging fees from the government and old lender are not included in upfront costs.
Fixed Rates – Cashback deals v refinancing with lowest rate lender
| Lender | Cashback | Fixed for 2 Years | From lowest to highest | Fixed 3 Year | From lowest to highest | Fixed 5 Year | From lowest to highest |
| CBA | $2000 | 2.29% | $936 | 2.29% | $2717 | 2.99% | $10,828 |
| Westpac | $3000 | 2.19% | -$1043 | 2.19% | $265 | 2.69% | $2675 |
| NAB | $2000 | 2.19% | -$43 | 2.29% | $2717 | 2.79% | $6055 |
| ANZ | $3000 | 2.29% | -$64 | 2.29% | $1717 | 2.69% | $2675 |
| Bank of Melbourne St George | $4000 | 2.24% | -$1,554 | 2.24% | -$9 | 2.74% | $2864 |
| Lowest | Lowest 3-year Offer $750 | 1.99% | $0 | 1.99% | $0 | 2.49% | $0 |
This is based upon an owner occupier switching from $500,000-based 5-year loans to a 30-year loan. Rates are calculated using a 70% LVR. Rates are calculated using the amount of interest paid and fees. (Discharging fees charged by the government or an old lender are not included within upfront fees.
add a comment
