Big bank cashback trap costs Aussie home buyers nearly $40,000

By Katherine O'Chee ·

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 - page last updated October 27, 2020

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.

I want to borrow


  • mozo-experts-choice-2020

    2.48% p.a. variable

    2.50% p.a.

  • mozo-experts-choice-2020

    2.09% p.a.
    fixed 2 years

    2.98% p.a.

  • mozo-experts-choice-2020

    2.34% p.a. variable

    2.34% p.a.

  • mozo-experts-choice-2020

    2.49% p.a. variable

    2.49% p.a.

  • Hot Deal$2,000 Refinance Cash Bonus (T&Cs apply)

    2.68% p.a. variable

    2.69% p.a.

Picture of Steve Jovcevski

Talk to a Mozo home loans expert

Buying your first home, refinancing your existing home or thinking of investing? Speak to Steve, our home loans expert today!

* 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

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.

Katherine O'Chee
Katherine O'Chee
Money writer

Katherine O’Chee is Mozo’s international money transfer and forex expert and business banking writer. She keeps Mozo’s readers on top of the latest news and writes in-depth features to inform and help Australians make smarter financial decisions. Her work has been published in major media outlets including Sydney Morning Herald, SBS News and Bangkok Post. She has a Bachelor of Arts (Media and Communications) from the University of Sydney.