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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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