Banks offer sizeable cashbacks and rewards to attract switchers
A number of lenders are currently providing significant cash incentives to borrowers who refinance, as competition in the mortgage market intensifies.
Analysis by comparison site Finder indicates that banks are offering cashbacks of up to $5,000, or as many as 300,000 Qantas points, to customers who move their home loans, often without changes to loan terms or interest rates.
Finder’s research highlights several lenders with substantial cashback offers. BankVic is providing between $4,000 and $5,000 to refinancers, with an interest rate of 5.35%. IMB is offering between $2,000 and $4,000 at a rate of 5.29 per cent, while ME Bank’s cashback stands at $3,000, with a 5.38% rate.
Other lenders such as AMP, Greater Bank, Summerland Bank, Bank of Queensland, Credit Union SA and Newcastle Permanent are also extending cashbacks in the $2,000 to $3,000 range.
Commonwealth Bank is providing Qantas and CBA points to those refinancing, with the number of points determined by loan size. Loans exceeding $1 million may qualify for up to 300,000 points, while loans under $500,000 can receive 100,000 Qantas points, with an interest rate of 5.39%.
Switching lenders typically incurs processing fees of around $1,000, although actual costs may vary depending on the loan amount and lender.
According to Graham Cooke (pictured top), head of consumer research at Finder, the increase in cashback offers is a direct response to heightened competition among lenders, leading to a surge in efforts to secure a greater share of the mortgage market.
Richard Whitten, home loans expert at Finder, noted that the cashback approach is a tactic for banks to differentiate themselves. “Home loans are fairly standardised products, and at the more competitive end of the market many loans have similar interest rates and fees,” he said. “Cashbacks are one way lenders can appeal to refinancers and new borrowers in a crowded field.
“This is a calculation on the lender’s part that rates could fall further, so they want to lock a borrower in at a rate today that might end up being slightly higher tomorrow as variable rates come down. The RBA’s decision to hold the cash rate in November changes this slightly. While I expect we’ll still see many lenders use cashbacks as a way to attract new business, we may see fewer lenders offering cashbacks if there’s no rate cuts on the horizon, which seems to be the case for now.”
A recent Finder survey of 35 economists found that about two-thirds anticipate another rate cut between February and May next year, citing ongoing softness in the labour market.
Aidan Hartley, director and broker at Owl Home Loans, observed that cashback offers may be intended to stimulate refinancing activity, which has generally been subdued. Most lenders have already passed on recent rate cuts, reducing the incentive for borrowers to switch. “We find most people who are refinancing are doing so because they want to take out equity,” Hartley said. “It’s rare for someone to switch lenders to save at the moment because often it’s easier to just renegotiate a new rate with the existing lender.”
Hartley also cautioned borrowers to consider loan features alongside cash incentives. “The most important thing is to make sure you have a loan where there is scope to make extra repayments, like through an offset,” he said. “The next most important thing is your rate. After that, a cashback would be the cherry on top.”
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