How to save thousands on your mortgage: Full list of banks offering cashback and cut rates

Desperate competition among banks is seeing families cut tens of thousands off mortgage costs and being paid as much as $5,000 cashback. SEE HOW THEY STACK UP AGAINST EACH OTHER

Grant Malcolm who has saved $1,200 a month in mortgage costs by refinancing and got $4,000 cashback from the bank. Photo Steve Pohlner

Desperate competition among banks is seeing families cut tens of thousands off two-year mortgage costs and being paid as much as $5,000 cashback by lenders to do so.

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Homeowners are racking up as much as $14,200 refinancing to the lowest two-year fixed rate loan with cashback offers (ING), but even banks not offering cashback are delivering savings of as much as $12,505 on half a million dollar loan balances now (Greater Bank), according to analysis by comparison site RateCity.com.au.

As many as 25 lenders, including the Big Four banks ANZ, CBA, NAB and Westpac, are so stretched by competition they’re running with twin sweeteners – cashback and rates below 2 per cent – to tempt homeowners to switch to them.

Bank of Queensland, Westpac and HSBC were ahead on variable rates when compared to the lowest rate on the market without cashbacks, according to RateCity analysis, with Westpac’s 1.99 per cent with $3,000 cashback offer delivering over $13,700 in savings over two years.

Bank of Melbourne and St George Bank both delivered the highest savings over two years when it came to their fixed rate offering, at over $14,600.

Home owners are in a powerful position, with banks offering numerous incentives to attract customers.

The RateCity calculations were based on an owner-occupier paying principal and interest with $500,000 owing and 25 years remaining switching to a cashback offer.

Cutthroat competition in Australia’s sizzling mortgage market saw a whopping $151b in refinancing occur across the country in the year to June, according to the Australian Bureau of Statistics. Latest ABS monthly figures – for July 2021 – saw a record $17.22b worth of home loans refinanced during the month, almost double that of two years ago, with the proportion of fixed rate loans surging from 15.5 per cent in July 2019 to 47.1 per cent in July 2021.

RateCity research director Sally Tindall 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”.

“The recent spike in refinancing is likely to be driven, at least in part, by a fear of missing out on a good rate. We expect this surge in refinancing to continue as mortgage holders in lockdown use this time at home to give their finances a spring clean.”

She said RBA figures showed the average existing owner-occupier on a variable rate loan was paying 3.07 per cent at a time when there were 181 mortgage rates on offer under 2 per cent.

“If your mortgage rate starts with a ‘3’, it could be time to jump on the refinancing bandwagon or at least pick up the phone and haggle with your current lender.”

Grant Malcolm saved $1,200 a month in mortgage costs by refinancing and got $4,000 cashback from the bank. Picture: Steve Pohlner

She said those who were in a position to refinance typically had a steady job, owned at least 20 per cent of their home and were not currently on a fixed rate which could incur break fees.

Indooroopilly homeowner Grant Malcolm tapped into Aussie Home Loans to exit a high cost construction loan after his bank made no effort to offer him a better deal upon building completion.

He slashed his rate in half, switching from 4.1 per cent to under 2 per cent, got $4000 cashback for doing so and saved a whopping $1,200 a month in repayments.

Mr Malcolm said for home builders, it was important to stress the need to refinance away from a construction loan once the building was actually finished. The family put the cashback offer into a fridge and dining set for their new home.

Research by mortgage broking firm Aussie found 60 per cent of those with mortgages weren’t confident that they had got a good deal but on a fifth actually acted and refinanced in the last year.

Internal data from Lendl Group found those refinancing could save $2,000 by dropping 1 per cent in their interest rate.

Lendl Group CEO David Hyman said it was “staggering” that some people were not capitalising on the lowest rates in history.

“It’s shocking that over half (54 per cent) of Australians haven’t ever refinanced their current home loan. While this can partly be explained by a knowledge gap when it comes to refinancing and what’s involved, bridging this gap with the help of an expert is not hard.”

He said reviewing your loan to get a better rate did not always mean you’d have to change lenders either.

Among the reasons given by those who did not refinance were they believed it was too hard or were unsure how to start (22 per cent), did not believe they could get a better deal (18 per cent), or were concerned they might end up worse off or paying more money (24 per cent).

The current lowest variable rate, according to RateCity, is 1.77 per cent and the lowest two-year fixed rate is 1.79 per cent.

Ms Tindall warned that homeowners must do the math first to consider what worked for their situation.

“It all comes down to 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.”

She suggested homeowners look at refinancing potential 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.”