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Naughty or nice: The cashbacks on offer

Reviewed by expert, David Koch
3 min read
20 Dec 2023
home loan variable interest rates

Competitive rates, cashback offers, and lowered serviceability buffers are some of the home loan sweeteners being used to attract new borrowers.

Compare the Market’s Economic Director, David ‘Kochie’ Koch, said the home loan market was “back and bubbling away with competition” but it was up to homeowners to sniff out the best deals.

“Some of the lenders that are still offering $2,000 or more in cashback include ME bank, BOQ, Bank SA, St George, and ANZ,” Mr Koch said.

“But be careful not to fall into a honey trap. Make sure the cashback deal is attached to a low rate, otherwise it may not be worth it.

“When the difference between some of the best and worst rates available is 1% or higher – it’s crucial to shop around to make sure you’re on the most competitive rate.”

A person with a $600,000 loan size may be better off refinancing to a lower variable rate of 5.99% without a cashback offer, compared to refinancing to a higher variable rate of 6.54% with a $2,000 cashback.

This is because they will have eaten into the $2,000 cashback after 10 months and wind up paying more money over the life of the loan.

Mortgage sizeThe difference between variable rates in the market
Minimum monthly repayments on variable P&I rate of 5.99% (HSBC)Minimum monthly repayments on variable P&I rate of 6.54% (ANZ)Difference in monthly minimum repayments
$500,000$2,995$3,174$179
$600,000$3,593$3,808$215
$750,000$4,492$4,760$268
$900,000$5,390$5,712$322
$1,000,000$5,989$6,347$358
Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 5.99% compared to 6.54% p.a; principal and interest (P&I) repayments; the loan term is 30 years; and there are no monthly fees.

Meanwhile, Westpac, NAB and Commonwealth Bank have lowered their serviceability buffers, from 3% to 1%, to help people break out of mortgage prison.

St George, Bankwest, Pepper Money, and Bluestone have also thrown a lifeline to overleveraged borrowers that meet certain criteria.

But Mr Koch said easier eligibility won’t necessarily translate to a better deal.

“If your loan to value ratio is above 80% you may be missing out on some of the cheaper rates on offer for borrowers who have paid off more of their debt,” Mr Koch said.

“With the cash rate now at its highest point in over a decade, it is extremely important to shop around to minimise the interest on your repayments as much as possible.”

Head to Compare the Market’s website to see how your home loan interest rate stacks up.

For more information, please contact:  

Natasha Innes | 0416 705 514 | [email protected]

 Compare the Market is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy insurance, energy, travel and home loans products from a range of providers. Our easy-to-use comparison tool helps you look for a range of products that may suit your needs and benefit your back pocket.

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