Customers warned not to be sucked in by short-term interest rate loan incentives, like holidays and frequent flyer points

HOME loan customers looking to snare good deals should focus on interest rate discounts and not get sucked in by incentives including cashback deals.

HOME loan customers looking to snare good deals should focus purely on interest rate discounts, not short-term carrots banks offer like holidays, experts warn.

Competition in the mortgage market is expected to intensify in 2015 with further rate falls predicted.

And that means more holidays, Qantas Frequent Flyer points, cash back deals and application fee waivers — some of the marketing tools attached to loans to lure new customers.

But experts say customers should only be comparing and considering the interest rates attached to the loans — these can deliver thousands of dollars in savings over the life of the loan instead of one-off application incentives, some worth no more than $1000 in total.

MORE: How to pick a good home loan deal

Consumer watchdog Choice’s spokesman Tom Godfrey urges customers to look beyond deals such as cash back offers.

“They are just a sales ploy to get you to part with your hard earned cash,’’ he said.

Ubank — a subsidiary of banking giant National Australia Bank — is the latest bank to drop its variable rate loan deal today to one of the lowest on the market at 4.46 per cent.

The deal is likely to put pressure on other lenders to follow suit.

The deal includes an ongoing discount for the life of the loan of 0.41 per cent and is available to customers with a loan more than $650,000 who apply up until January 26.

They must also have a loan-to-value ratio of 80 per cent or more.

Comparison website Mozo’s spokeswoman Kirsty Lamont urges home loan customers not to get lured in by marketing incentives and encourages them to stay focused on the interest rates on offer. Picture: News Corp Australia.

UBank’s head of digital acquisition Sally Kiernan said there’s always an huge increase in home loan applications at this time of year with competitive deals springing onto the market.

“In the time we’ve offered home loans Boxing Day we’ve had an absolute spike in terms of applications, there’s consumer demand,’’ she said.

“People have got through the Christmas hump and they’ve done all their spending, they’ve enjoyed the day and they are starting to look to the year ahead.”

Online lenders have lower costs than their rivals and are leading the charge by offering long-term interest rate discounts for the life of the loan.

But Mozo spokeswoman Kirsty Lamont said incentives are fine, but the rate should be the only deciding factor.

“Your home loan’s interest rate is the biggest deciding factor in the cost of your home loan,’’ she said.

“The lower the interest rate is the less interest you will pay and the quicker you’ll be able to pay off your loan.”

Monthly repayments on a $300,000 variable rate loan can greatly differ when comparing the highest and lowest rates on the market.

Customers can end up paying an additional $350 per month if they are on the highest rate of 6.38 per cent.

Originally published as Customers warned not to be sucked in by short-term interest rate loan incentives, like holidays and frequent flyer points