Cashback deals soar as lenders compete

The number of banks offering cashback deals for home loan refinancing has hit new highs.

A typical refinancer who gets a big-four cashback deal to refinance a variable or fixed rate mortgage will typically save money compared to switching to the lowest priced variable or fixed loan on the market over two or three years.

The number of banks offering cashback deals for home loan refinancing has hit new highs as lenders race to grab larger slices of an increasingly competitive market.

Figures from RateCity released on Monday show that 29 lenders are offering cashback deals of up to $4000, mostly for mortgaging refinancing — twice the number offering such deals in February.

Refinancing has boomed throughout the coronavirus pandemic, with Reserve Bank governor Phillip Lowe publicly urging Australians to take advantage of a falling cash rate and renegotiate their home loans.

The latest Australian Bureau of Statistics figures show that 137,372 loans have been refinanced between April and August this year, with the number of mortgages refinanced in August this year 22 per cent higher than the previous comparable period.

With all four of the banks also offering cashback deals, Rate­City research director Sally Tindall said the refinancing market was “more competitive than ever”.

“Banks need to be winning new business, not losing it, and they’re throwing large sums of cash at anyone willing to refinance, particularly if they’ve got a good track record of paying down their debt and a steady job,” she said.

A typical refinancer who gets a big-four cashback deal to refinance a variable or fixed rate mortgage will typically save money compared to switching to the lowest priced variable or fixed loan on the market over two or three years.

However, beyond four or five years, more money is saved by going with the lowest rate — but Ms Tindall said this may change as lenders continued to enter the cashback market.

“Banks are increasingly offering sign-up specials on their lowest rate loans, making them far more competitive than they used to be,” she said.

“Don’t just assume you’ll be better off with a cashback special. Do the maths yourself to work out if the whole package is going to put you ahead or leave you in the red,” she said.