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Home loan cash backs heat up, but are they worth it?
More than a dozen lenders are offering cash incentives for home owners willing to move their business to a new lender, with Suncorp Bank, Reduce Home Loans and 86 400 the latest to put cash offers on the table.
Suncorp Bank is now offering up to $3,000 to refinancers, plus an additional $1,000 for people working in essential services roles, such as doctors, nurses, teachers and police officers.
A total of 13 banks currently have cashbacks on offer, including three of the big four banks – CBA, Westpac and ANZ.
List of cashback offers on a $400,000 loan
| Bank | Cashback | Type | Advertised rate |
| ANZ | $4,000 | Refinance (brokers only) | 2.72% |
| Suncorp | $2,000 or $3,000 | Refinance | 2.78% |
| Virgin Money | $2,500 | Refinance | 2.79% |
| CBA | $2,000 | Refinance | 2.79% |
| Westpac | $2,000 | Refinance | 2.93% |
| St George | $2,000 | Refinance | 2.69% |
| Bank of Melbourne | $2,000 | Refinance | 2.69% |
| BankSA | $2,000 | Refinance | 2.74% |
| People's Choice Credit Union | $2,000 | Refinance | 2.69% |
| RAMS | $2,000 | Refinance | 2.74% |
| 86 400 | $2,000 | New customers | 2.74% |
| Reduce Home Loans | $2,000 | New customers | 2.59% |
| MOVE Bank | $1,000 | New customers | 2.69% |
Source: RateCity.com.au. Note: Suncorp is offering $2,000 for loans below $750,000 and $3,000 for loans above $750,000. Reduce is offering larger cashback amounts for loans over $1 million. See full notes below.
RateCity crunched the numbers based on someone refinancing their loan with $400,000 remaining to see whether they would be ahead or behind after picking a cashback special over one of the lowest rates in the market.
How much extra you would pay on average compared to going with one of the five lowest rate loans:
| Extra paid compared to a low rate loan | |||||
| Bank | Cashback | Advertised rate | Over 2 years | Over 5 years | Over 25 years |
| ANZ | $4,000 | 2.72% | -$1,792 | $1,882 | $15,632 |
| Suncorp (essential worker) | $3,000 | 2.78% | -$471 | $3,875 | $20,168 |
| Reduce Home Loans | $2,000 | 2.59% | -$417 | $1,807 | $10,092 |
| People's Choice Credit Union | $2,000 | 2.69% | -$178 | $3,161 | $15,644 |
| Bank of Melbourne | $2,000 | 2.69% | $86 | $3,425 | $15,908 |
| St George | $2,000 | 2.69% | $86 | $3,425 | $15,908 |
| BankSA | $2,000 | 2.74% | $479 | $4,377 | $18,973 |
| 86400 | $2,000 | 2.74% | $965 | $5,613 | $25,209 |
| Suncorp | $2,000 | 2.78% | $529 | $4,875 | $21,168 |
| Virgin Money | $2,500 | 2.79% | $798 | $5,616 | $24,733 |
| CBA | $2,000 | 2.79% | $808 | $5,266 | $21,983 |
| RAMS | $2,000 | 2.74% | $1,095 | $4,993 | $19,589 |
| MOVE Bank | $1,000 | 2.69% | $1,272 | $4,611 | $17,094 |
| Westpac | $2,000 | 2.93% | $1,709 | $7,737 | $30,444 |
Source: RateCity.com.au. Calculations are based on the interest paid, plus upfront and ongoing fees, minus any cashback offered. Full notes below.
Sally Tindall, research director at RateCity.com.au, said while low rate loans were usually more cost effective, the tide was turning as the bigger banks chase after new customers more aggressively.
“Cashback specials are nothing new. They’ve been used for years as a clever marketing tool to grab people’s attention. What’s changed is the banks are starting to offer cashback on loans that also have competitive rates,” she said.
“Someone who refinances every couple of years to a competitively priced loan could potentially come out on top by taking up a cashback special.
“However, over the long term it’s a completely different story. A low rate is almost certainly going to trump a one-off perk over 10 or 20 years – often by tens of thousands of dollars.
“While the promise of cold hard cash is hugely attractive for anyone juggling the bills, people who put the money back into their mortgage will see even bigger savings as it will reduce their interest charges every single day.
“It’s great to see Suncorp giving some extra cash to new customers who work on the frontline as a thank you for their service over this challenging time,” she said.
Before refinancing for a cashback deal – check:
- Is the interest rate competitive (the lowest variable is 2.29 per cent and the lowest fixed is 2.09 per cent)?
- Read the terms and conditions carefully to make sure you’re eligible for the cashback.
- Are the fees high? (some banks charge no upfront or ongoing fees). Ask the new lender to waive them if there are.
- Does the loan offer the flexibility you need? (like an offset account, ability to make extra repayments.
- Are you in position to refinance? This may include having a steady job, having a good amount of equity in your home, etc.
- Can you put the cashback bonus into your mortgage? Extra repayments help reduce your interest charges over the years to come.
Notes:
- The calculations are based on the interest paid, plus upfront and ongoing fees, minus any cashback offered. Calculations are based on an owner occupier loan paying principal and interest with 25 years remaining and a balance of $400K. Calculations do not include discharge fees from current bank or government fees.
- The lowest variable rate is an average of the lowest 5 variable rates on RateCity's database.
- The bank rates are the lowest variable rates offered by each bank with the cashback offer. Some LVR requirements apply for certain rates. For Virgin Money the calculations do not include frequent flyer points.
- Suncorp is offering $2000 cashback for loans between $250K and $750K. Refinancers above $750K get $3000 cashback. Suncorp is offering an extra $1000 cash back for essential workers including doctors, nurses, teachers, police officers, firefighters, state emergency service and defence force personnel.
- Reduce Home Loans is offering $2000 cashback for loans under $1 million, $4000 for loans under $2 million, $6000 for loans under $3 million, $8000 for loans under $4 million and $10,000 for loans over $4 million. Reduce charges a higher interest rate (2.59%) when taking out the cashback deal than their lowest rate loan (2.29%).
- Cashback and fees are not added to the loan balance.
Disclaimer
This article is over two years old, last updated on May 21, 2020. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.
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