There are currently a record 29 lenders offering cashback deals for homeowners looking to refinance their mortgage – more than double the number available in February before the COVID-19 pandemic had much impact in Australia.
Most of the deals currently on offer are for refinancers only and the associated savings span between $1,000 and $4,000 for average mortgages; as of 27 October, each of the big four banks are in on the action.
According to Sally Tindall, RateCity.com.au research director, the rise in refinancing is "forcing banks to be 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 added.
Refinancing activity has been frenzied since the start of the pandemic; from April to August, 137,372 loans have been refinanced, with May marking the record high.
While Tindall has been vocal in the past about the risks of being dazzled by cashback offers, emphasising that most are more expensive in the long term and only someone who refinances every couple of years could potentially come out on top by taking up such a special, she has now acknowledged the “tide is turning”.
“Banks are increasingly offering sign-up specials on their lowest rate loans, making them far more competitive than they used to be,” she explained.
“While a low ongoing rate typically trumps a sign-up special over the longer term, if you’re someone who refinances regularly, and knows how to drive a hard bargain on rate and fees, you could end up ahead in the first couple of years.
“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," Tindall finished.
