Breaking News Today

Record number of banks offering thousands for moving your mortgage

Published: (Updated: ) in Australian News by .

A record number of lenders are trying to lure customers to switch with cashback sweeteners of up to $4000, but does it actually pay?

For some time now the banks have gone to battle on rates but now it's all-out war as they splash the cash to get you to move your mortgage.

A record number of lenders are trying to lure customers to switch with cashback sweeteners of up to $4000.

But does it actually pay?

A record number of banks are offering cashback if you move your mortgage.

There are now 27 lenders offering cashback deals ranging from $1000 to $4000 however the offers are mostly for those who refinance their mortgages.

That's more than double the 12 institutions who offered cashback deals in February before the pandemic hit and the highest number RateCity has ever seen.

While switching banks and pocketing $4000 for your efforts might seem like a good idea now, in a year or two you might be worse off.

If someone with a $500,000 home loan balance refinanced to a big four bank on their lowest variable rate loan instead of the lowest variable rate loan on the market, they would come out ahead with Westpac after two years, but behind on the other three big banks, even in the second year, RateCity analysts found.

It's a different story though with two-year fixed rates, where you're much more likely to come out on top with a cashback bonus.

Lenders offering home loan cashback deals on loans of $500,000

Big Four bank

Type

Cashback

Lowest advertised variable rate

CBA

Refinance

$2000

2.79%

Westpac

Refinance

$3000

2.19%

NAB

Refinance

$2000

2.69%

ANZ (through broker)

Refinance

$3000

2.72%

Source: RateCity.com.au

(All rates are the lowest ongoing variable rates except for Westpac and GMCU, where they are introductory rate loans. Some of these loans are geographically and occupationally restricted.)

"A low ongoing rate typically trumps a sign up special, particularly over the longer term but the tide is shifting," RateCity research director Sally Tindall says.

"The banks offering these sign-up specials are now increasingly offering competitive rates as well, which makes these deals far more cost effective than they used to be.

READ:  MORE THAN 100 PLANNING DECISIONS FAST-TRACKED IN SIX MONTHS

"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.

"Over the life of the loan however it's a completely different story. A low rate is almost certainly going to beat a one-off perk, usually by tens of thousands of dollars. Don't get caught up in the promise of cold hard cash. Do the maths to work out if it's going to set you ahead or leave you short changed."

The advice is to know what you need from your loan, including whether you need access to features such as an offset account or you're refinancing for a better rate.

Lenders offering home loan cashback deals on loans of $500,000

Other lenders - in order of 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

up to $3000

2.84%

Credit Union SA

New loans & refinance

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

New loans for FHB

$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 Home Loans

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

up to $1500

2.29%

QBank

New loans & refinance

$1500

2.74%

READ:  Anthony Albanese dismisses speculation his leadership is under threat

Source: RateCity.com.au

(All rates are the lowest ongoing variable rates except for Westpac and GMCU, where they are introductory rate loans. Some of these loans are geographically and occupationally restricted.)

"If the home loan you're interested in ticks all of your boxes and comes with a perk, then great. If you find yourself looking at home loans just because of the perk, then the chances are the bank's marketing has gotten the better of you," Ms Tindall says.

The cashback deals are usually targeted at refinancers who are seen as more stable borrowers.

But refinancing can be a paperwork nightmare, especially if you're self-employed so many become complacent. Hence the cashback lures.

For Adam Kennedy, it was a win-win situation. He refinanced his loan through a broker, secured a lower rate as well as a $4000 cash payment through NAB.

The father-of-two, who manages an advertising agency, says lower rates around June gave him incentive to switch but once the cashback offers hit the market, that sealed the deal.

"It really does pay to look around," Mr Kennedy said, adding he's time poor and has been guilty of paying too much and not refinancing in the past.

"There's definitely some money to be saved.

"We got a better rate than we were already getting and we got the cash back in addition. So there was kind of no reason to hold back. We just went for it."

RateCity says before refinancing for a cashback deal, check:

READ:  Trump Hospitalised After Testing Positive For Racism, Sexism, Bullying And Pathological Lying

Are cashbacks worth it?

Variable rates - Cashback deals v refinancing to the lowest rate lender

Bank

Rate

Cashback

After 2 years - difference to lowest

After 3 years - difference to lowest

After 5 years - difference to lowest

CBA

2.79%

$2000

$4282

$7225

$12,896

Westpac

2.19% 2 yr intro then 2.69%

$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 and interest switching five years into a 30-year loan with a $500,000 balance. Rates are for an LVR of 70%. Costs are based on interest paid plus fees. Upfront fees do not include discharge fees from the old lender or government fees.)

Fixed rates - Cashback deals v refinancing to the lowest rate lender

Lender

Cashback

2 year fixed

Difference to lowest

3 year fixed

Difference to lowest

5 year fixed

Difference to lowest

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

St George, Bank of Melbourne

$4000

2.24%

-$1,554

2.24%

-$9

2.74%

$2864

Lowest

Typically none (lowest 3 year offers $750)

1.99%

$0

1.99%

$0

2.49%

$0

(Based on an owner occupier paying principal and interest switching five years into a 30-year loan with a $500,000 balance. Rates are for an LVR of 70%. Costs are based on interest paid plus fees. Upfront fees do not include discharge fees from the old lender or government fees.)

Source: 9News https://www.9news.com.au/national/how-to-save-thousands-on-with-cashback-on-your-mortgage/0d393a02-3902-4ddc-a146-ba3c6535eedf

Shares
Share This
Finance Advice 2021