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21 lenders offering cashback on home loans rates under 2%

21 lenders offering cashback on home loans rates under 2%

Lenders are offering up to $5,000 cashback on home loan rates under 2 per cent, in a bid to win over new customers. 

New RateCity.com.au analysis shows there are 25 lenders offering cashback deals – 21 of these lenders are also offering at least one rate under 2 per cent for owner-occupiers refinancing, in addition to the cashback.

RateCity.com.au database analysis:

  • 25 lenders are offering cashback deals.
  • 21 of those lenders are offering cashback on at least one rate under 2% for owner-occupiers.
  • Cashback amounts range from $1,000 - $5,000.
  • Most cashbacks are for refinancers only.
  • All big four banks are offering cashback deals (ANZ is only offering cashback via a broker).

With refinancing hitting a record high in June, cashbacks are a popular perk being offered by lenders to attract new customers. The latest ABS lending indicator figures show $151 billion in home loans have been refinanced in the last 12 months.

Sally Tindall, research director at RateCity.com.au, said: “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.”

“Cashback deals can potentially work in a person’s favour if they commit to finding the best deals and refinance regularly. However, anyone who doesn’t look past the lure of instant cash could potentially shoot themselves in the foot if they’re not careful,” she said.

“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.

How cashback deals stack up

RateCity.com.au compared the cashback specials to the lowest rate options on the market, based on a typical refinancer (see full assumptions at end).

Fixed rates

The lowest 2-year fixed rate on the market is 1.79 per cent, however, on the average-sized mortgage of $500,000, 17 lenders are offering cheaper 2-year deals over the fixed rate term when cashback, interest charges and fees are included.

For example, if the average variable rate customer refinanced to the lowest 2-year fixed rate on the market (Greater Bank, 1.79 per cent), they could potentially save up to $12,505 in the first two years. However, if they went with the lowest 2 year fixed rate loan offering cashback (ING, 1.84 per cent), they could save $14,200, which is $1,695 more.

Warning: if any fixed rate loan rolls on to the bank’s revert rate, which is usually significantly higher, the person’s savings are likely to start depleting.

Potential savings refinancing to the lowest 2-year fixed rate loan - $500,000 loan balance

RateCashbackSavings after 2 yrs
Average existing customer

3.07%

 $0

-

Lowest 2 yr rate – Greater Bank

1.79%

$0

$12,505

Lowest 2 yr rate with cashback - ING

1.84%

$3,000

$14,200

Source: RateCity.com.au. Notes: the average existing customer variable rate is from the RBA, calculations are based on an owner occupier paying principal and interest with $500,000 owing and 25 years remaining. Savings calculations are interest paid, plus switching and ongoing fees, minus any cashback.

RateCity Tip: To avoid rolling on to a high variable revert rate, set a reminder a few months before the fixed rate ends to shop around for a new deal.

Variable rates

It’s a different story when comparing cashback deals on variable loans. After just two years, only two cashback deals (one other lender) come out ahead against the lowest variable rate on the market. After 3 years, none of them trump the lowest ongoing rate (assuming these rates stay the same).

For example, RateCity.com.au analysis shows if the average refinancer switched to the lowest variable rate on the market (Reduce Home Loans, 1.77 per cent), they could save $11,710 in two years. If they went with HSBC instead, which is offering the lowest variable rate with a cashback, they could save $102 more in the first two years, even though the rate is 0.42 per cent higher.

Potential savings from refinancing to the lowest variable rate - $500,000 loan balance

CashbackRateSavings over 2 yrsSavings over 3 yrs
RBA ongoing variable rate

3.07%

Lowest variable - Reduce

$0

1.77%

$11,710

$18,269

Lowest variable with cashback - HSBC

$3,288

2.19%

$11,812

$16,395

Before refinancing for a cashback deal – check:

  • Is the interest rate competitive? The lowest variable is 1.77% and the lowest 2-year fixed is 1.79%.
  • 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, 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.

Full list of cashback home loan specials on RateCity.com.au

LenderCashbackLowest 2 yr fixedLowest variableAvailable for
ING

$3,000

1.84%

2.45%

Refinance
HSBC

$3,288

1.88%

2.19%

Refinance
Westpac

$3,000

1.89%

2.19% for 2 yrs then 2.69%

Refinance
St. George Bank

$3,000

1.89%

2.44%

Refinance
Suncorp

$3,000

1.89%

2.44%

Refinance
Bank of Melbourne

$3,000

1.89%

2.44%

Refinance
ME Bank

$3,000

1.89%

2.33%

Refinance
People's Choice Credit Union

$3,000

1.89%

2.49%

Refinance
Bankwest

$2,000

1.89%

2.99%

Refinance
Newcastle Permanent

$2,000

1.89%

2.59%

Refinance
Great Southern Bank

up to $3,000

1.89%

2.49%

Refinance
86 400

$2,000

1.89%

2.39%

Refinance
ANZ (via broker)

$3,000

1.94%

2.72%

Refinance
Virgin Money

$3,000

1.98%

2.39%

Refinance
CBA

$2,000

1.99%

2.69%

Refinance
bcu

up to $5000

1.99%

2.44%

New loans & refinance
RAMS

$4,000

1.99%

2.44%

Refinance
Bank of Queensland

$3,000

1.99%

2.49%

Refinance
BankSA

$3,000

1.99%

2.49%

Refinance
NAB

$2,000

1.99%

2.69%

Refinance
Reduce Home Loans

various

-

1.99%

New loans & refinance
MyState Bank

$3,000

2.09%

2.29%

Refinance
BankVic

$1,500

2.19% for 3 yrs then 2.74%

New loans & refinance
WLTHs

$1,000

-

2.29%

Refinance
Credit Union SA

$2,500

2.59%

2.59%

New loans & refinance

Notes: Rates listed above are the lowest advertised home loan rates for owner occupiers paying principal and interest that qualify for the cashback offer. Note some lenders do not offer cashback on their lowest rates including Reduce Home Loans and Credit Union SA.  Suncorp cashback only available on loans over $750K, Credit Union SA offers up to $5K for first home buyers taking out lenders mortgage insurance, bcu is offering 0.75% of the loan up to $5,000, Great Southern Bank offers a separate, $2,000 first home buyer offer, with the funds added to deposit instead of cashback at settlement and is not on offer for any customer taking out a loan under the Federal Government's first home loan deposit scheme. Reduce Home Loans is offering cashback of between $1K and $10K, depending on loan size. Westpac rates are for loan to value ratios of 70% or lower. WLTH cashback is for investors only.

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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Learn more about home loans

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

What is a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

How long can you fix a home loan rate for?

Most lenders should let you fix your interest rate for anywhere between one and five years. While rare, a few lenders may offer fixed rate terms for as long as 10 years.

Fixing your home loan interest rate for a longer term can keep your budgeting fairly straightforward, as you shouldn't have to factor in changes to your mortgage repayments if variable rates change, such as when the Reserve Bank of Australia (RBA) changes its rates at its monthly meeting. Additionally, if variable rates rise during your fixed rate term, you can continue to pay the lower fixed rate until the fixed term ends, potentially saving you some money.

Of course, a longer fixed term also means a longer length of time where you may have less flexibility in your home loan repayments. It’s also a longer period where you won’t be able to refinance your mortgage without paying break fees. If variable rates were to fall during this period, you may also be stuck paying a higher fixed rate for a longer period.

What is the difference between a fixed rate and variable rate?

A variable rate can fluctuate over the life of a loan as determined by your lender. While the rate is broadly reflective of market conditions, including the Reserve Bank’s cash rate, it is by no means the sole determining factor in your bank’s decision-making process.

A fixed rate is one which is set for a period of time, regardless of market fluctuations. Fixed rates can be as short as one year or as long as 15 years however after this time it will revert to a variable rate, unless you negotiate with your bank to enter into another fixed term agreement

Variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts however fixed rates do offer customers a level of security by knowing exactly how much they need to set aside each month.

What is a comparison rate?

The comparison rate is a more inclusive way of comparing home loans that factors in not only on the interest rate but also the majority of upfront and ongoing charges that add to the total cost of a home loan.

The rate is calculated using an industry-wide formula based on a $150,000 loan over a 25-year period and includes things like revert rates after an introductory or fixed rate period, application fees and monthly account keeping fees.

In Australia, all lenders are required by law to publish the comparison rate alongside their advertised rate so people can compare products easily.

What is a standard variable rate (SVR)?

The standard variable rate (SVR) is the interest rate a lender applies to their standard home loan. It is a variable interest rate which is normally used as a benchmark from which they price their other variable rate home loan products.

A standard variable rate home loan typically includes most, if not all the features the lender has on offer, such as an offset account, but it often comes with a higher interest rate attached than their most ‘basic’ product on offer (usually referred to as their basic variable rate mortgage).

What are the different types of home loan interest rates?

A home loan interest rate is used to calculate how much you’ll pay the lender, usually annually, above the amount you borrow. It’s what the lenders charge you for them lending you money and will impact the total amount you’ll pay over the life of your home loan. 

Having understood what are home loan rates in general, here are the two types you usually have with a home loan:

Fixed rates

These interest rates remain constant for a specific period and are a good option if you’re a first-time buyer or if you’re looking for a fixed monthly repayment. One possible downside of a fixed rate is that it may be higher than a variable rate. Also, you don’t benefit from any lowering of interest rates in the market. On the flip side, if rates go up, your rate won’t change, possibly saving you money.

Variable rates

With variable interest rates, the lender can change them at any time. This change can be based on economic conditions or other reasons. Changes in interest rates could be beneficial if your monthly repayment decreases but can be a problem if it increases. Variable interest rates offer several other benefits often not available with fixed rate home loans like redraw and offset facilities and free extra repayments. 

Does the Home Loan Rate Promise apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Home Loan Rate Promise.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

What is the Home Loan Rate Promise?

The Home Loan Rate Promise is RateCity putting its money where its mouth is. We believe that too many Australians are paying too much for their home loans. We’re so confident we can help Aussies save money, if we can’t beat your current rate, we’ll give you a $100 gift card.*

There are two reasons it pays to check your rate with the Home Loan Rate Promise:

  • You can find out how much you could save on your home loan by switching to a loan with a lower interest rate
  • If we can’t beat your current rate, you can claim a $100 gift card with our Home Loan Rate Promise*

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.