Are home loan cashbacks coming to an end?

Cashback deals can be an attractive sweetener for refinancers. But the days of a cash freebie could be drawing to a close. Here’s what it may mean for you and your home loan.

The mortgage market can change rapidly. At the start of 2023, more than 30 lenders were offering cashback deals to borrowers looking to refinance their home loan.1   

Now, just six months down the track, a growing number of lenders are bailing out of cashbacks.  

The Commonwealth Bank, Westpac and NAB have either scrapped or set an end date for their cashbacks.2 ING and Suncorp have also announced that their cashback offers will be shelved.3  

What does this change mean for you and your loan? Let’s take a closer look. 

What is a home loan cashback? 

A cashback offer is an incentive offered by a lender when you take out a home loan as a new customer. While they are mainly available to refinancers, some lenders make cashbacks available to other borrowers.4  

How much are cashbacks worth? 

Cashbacks generally range from $1,000 to $4,000.5 To be eligible, you usually need to meet various conditions.  

The size of your home loan6, and/or the value of the loan relative to the value of your home (known as the loan-to-value ratio or LVR)7 are often used to determine if you’re eligible for a cashback. 

So, why are lenders pulling out of cashbacks? 

The short answer is that cashbacks are proving to be an expensive way for lenders to attract new customers. 

Recent years have seen Australian homeowners refinance in droves.8  

As a guide to the sheer volume of refinancing activity, the Australian Banking Association says around 2,400 Australians refinanced their home loan every working day over the past six months.9   

Those sorts of numbers mean lenders can end up paying considerable sums of money to attract new home loan customers.  

The downside of cashbacks for borrowers  

While it's hard to ignore a dangling cashback carrot, the main game should always be ensuring you have the home loan that is right for your needs. And that means a mortgage with a competitive interest rate, combined with loan features that can save you money. 

The problem with cashbacks is that they can entice borrowers to take out a loan that may not be the best option for their needs. As a guide, a survey by Finder showed one in four Australians would prefer a one-off cash bonus over long-term loan savings.10 

How your Mortgage Choice broker can help 

As homeowners navigate yet another rate hike, it always makes good sense to check in with your Mortgage Choice broker to see if you could save by switching to a loan with a lower rate.  

Having a conversation with your broker is especially critical if you are about to come off a low fixed rate. We can help you understand what your new repayments will look like, so you can plan ahead, and we’ll crunch the numbers to let you know if you could be better off switching loans or lenders to access a better deal.  

Mortgage Choice brokers have access to hundreds of great home loan deals from a wide range of banks, credit unions and building societies. And yes, some of the lenders we partner with still offer cashback deals.11   

What matters most is that your Mortgage Choice broker will take the time to understand your needs, financial situation and long-term goals. From there, we make it easy to find the home loan that matches your needs, and which can help you save money over the long term rather than focusing on a here-today-gone-tomorrow cash sweetener.