Big bank cashback trap costs Aussie home buyers nearly $40,000
If you’re planning to take out a mortgage with a big bank for the sake of their $2,000 cashback, it might be time to rethink your options. New research from Mozo has found Aussie home loan borrowers hopping onto the cashback bandwagon could be ripped off $37,294 over the life of their loan by not shopping around for a more competitive deal.*
Mozo’s findings reveal that even if you spent the entire $2,000 cashback on making monthly repayments, the savings would disappear in the first 18 months on a $300,000 loan and in just 6 months on a $1,000,000 loan.**
Among major banks including Westpac, St George, Commbank and NAB, a total of 7 of these cashbacks were offered to home loan customers.
RELATED ARTICLE: New way to borrow takes Australia by storm
Mozo Director Kirsty Lamont said while these cashback offers seem like a good catch short term, they end up imprisoning borrowers inside bad rates that you could be stuck with for decades.
“Home loans are a long term commitment and if you set and forget your loan after banking a cashback offer you could be trapping yourself with a poor interest rate and higher monthly repayments,” Lamont said.
“Don’t believe the hype when it comes to home loan cash back offers. Your best option is always to compare what’s on offer and go with the most competitive rate.”
The big banks vs online lenders: what’s the difference in their rates?
Mozo data shows that the big banks definitely aren’t your best bet if you’re looking for an affordable home loan. Online lenders have risen as true movers and shakers in the mortgage market, offering customers much lower interest rates and fees.
In terms of average numbers, the Big 4’s variable interest rate now sits at 4.10%^, having dropped 139 basis points from 5.44% since 1 January 2015. Meanwhile, over the same period, the average variable rate for online lenders has fallen further, going down 150 basis points from 4.96% to 3.46%.
“On average, the big four banks’ variable interest rates are still 64 basis points above the average of the online lenders. So if you’re looking to cut your repayments, online lenders offer you a ticket out of the big banks’ high interest rate cashback trap,” Lamont said.
Even when you place the big banks’ cheapest rates side-by-side with those of leading online lenders, there continues to be a 31 basis point difference between the two.
In fact, two thirds of lenders in Mozo’s comparison database now offer variable rates below 3.50%, which beat the big bank average. And the lowest rates in our database - drumroll, please - start from as low as 2.89% with Reduce Home Loans!
Thinking of buying a house soon? Head over to our comparison table to get started on finding a great home loan for you.
Compare top home loans - last updated January 23, 2021
Smart Booster Home Loan
1 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR
interest rate
comparison rate
Initial monthly repayment
1.99% p.a.variable for 12 months and then 2.48% p.a. variable2.47% p.a.A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends). 20% minimum deposit required.
CompareCompareSmart Booster Home Loan
A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends). 20% minimum deposit required.
- interest rate
- 1.99% p.a.variable for 12 months and then 2.48% p.a. variable
- comparison rate
- 2.47% p.a.
- Upfront fees
- $520
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- Optional - with 0.10% additional interest
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $50,000
- maximum borrowing amount
- $1,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Smart Booster Home Loan
UHomeLoan - Discount Offer
Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment
2.34% p.a. variable2.34% p.a.Enjoy a super low rate, $0 fees and easy application with the Mozo Experts Choice Home Lender Bank of the Year.^ Free redraw with flexible repayments. Min 20% deposit.
CompareCompareUHomeLoan - Discount Offer
Enjoy a super low rate, $0 fees and easy application with the Mozo Experts Choice Home Lender Bank of the Year.^ Free redraw with flexible repayments. Min 20% deposit.
- interest rate
- 2.34% p.a. variable
- comparison rate
- 2.34% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $100,000
- maximum borrowing amount
- -
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the UHomeLoan - Discount Offer
Celebrate Variable Home Loan
<60% LVR, Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment
2.19% p.a. variable2.19% p.a.Fast online application with no fees. Free extra repayments and redraw facility. Min 40% deposit. Crowned Best New Home Loan for 2020 by the Mozo Experts.^
CompareCompareCelebrate Variable Home Loan
Fast online application with no fees. Free extra repayments and redraw facility. Min 40% deposit. Crowned Best New Home Loan for 2020 by the Mozo Experts.^
- interest rate
- 2.19% p.a. variable
- comparison rate
- 2.19% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $100,000
- maximum borrowing amount
- $2,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Celebrate Variable Home Loan
Basic Home Loan
Fixed, Owner Occupier, Principal & Interest, LVR 70-80%
interest rate
comparison rate
Initial monthly repayment
2.09% p.a.
fixed 2 years2.56% p.a.Flexible loan structure – create up to six loan accounts with different rate and repayment types. Free redraw from your loan using Macquarie Online.
CompareCompareBasic Home Loan
Flexible loan structure – create up to six loan accounts with different rate and repayment types. Free redraw from your loan using Macquarie Online.
- interest rate
- 2.09% p.a.
fixed 2 years
- comparison rate
- 2.56% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $400.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $750,000
- type of mortgage
- Fixed
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Basic Home Loan
Fixed Home Loan Special Offer
Owner Occupier, Principal & Interest, <80% LVR
interest rate
comparison rate
Initial monthly repayment
1.89% p.a.
fixed 2 years2.94% p.a.Competitive low rates starting from 1.89% (2.94% comparison rate) 2 years fixed for owner occupiers. No monthly account keeping fees & No loan establishment fee.
CompareCompareFixed Home Loan Special Offer
Competitive low rates starting from 1.89% (2.94% comparison rate) 2 years fixed for owner occupiers. No monthly account keeping fees & No loan establishment fee.
- interest rate
- 1.89% p.a.
fixed 2 years
- comparison rate
- 2.94% p.a.
- Upfront fees
- $0
- Ongoing fees
- $375.00 yearly
- Discharge Fee
- $350.00
- Extra repayments
- yes - free up to $500 per month
- Redraw facility
- no
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- -
- type of mortgage
- Fixed
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Fixed Home Loan Special Offer
* Cost saving based on the difference between Big 4 and online lenders' average owner occupier, principal & interest, $300,000 home loan at 80% LVR over 30 years, minus a $2,000 cash back offer.
** Saving calculated by comparing the average variable rate of the big banks with the average variable rate of the online lenders as of 10 September 2019.
^ Average variable rate as of 16 September 2019.
^See information about the Mozo Experts Choice Home Loans Awards
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