Refinance home loans cut cashback as lenders rethink their offers

One of the interesting trends arising from the Reserve Bank rate hikes has been lenders pulling their cashback offers for refinancers. In May 2023, Mozo recorded 25 lenders with refinancing cashback offers in its database. Today in August, it’s just 13. 

While lenders never intended these to be long-lasting deals, the disappearance of cashback offers comes hand in hand with hikes to many discounted or introductory interest rates for new home loans. In a nutshell: interest rates are getting worse, and special perks are getting rarer. 

Yet despite these trends, the ABS reported that Australians still scrambled to refinance $20.2 billion worth of mortgages in June 2023 to escape rising repayments. The demand is there. So in a time of high mortgage stress, why are home loan lenders killing their best refinance offers?

Mozo banking expert Peter Marshall says the lacklustre refinance offers indicate a worrying lack of interest in new customers.

“There’s definitely less competition for refinancing now,” explains Marshall. “As the rate rise cycle seems to be ending, lenders are shifting their focus from gaining new customers to keeping those they have, and rebuilding their profits.”

Rebuilding their profits is correct – CBA recently reported an over $10 million profit for the 2023 financial year, up 5% from last year, supported by strong growth in net interest income from home loans. Yet despite the extra profits, CBA was one of the first Big Four banks to rescind its cashback offers to refinancers in May.

“They’re not offering these deals out of the generosity of their hearts – banks are still businesses,” Marshall reminds. “And now hanging onto the customers a bank has is the priority. There’s no real reason to fight for new ones with special deals if you can help it.”

For customers, it’s a timely warning to refrain from settling or being complacent with a mortgage. Refinancing can still come with major savings if you know what to look for. The real money savings for a home loan come through three main items:

• Interest rates.
• Features.
• Fees. 

These are the actual costs of a home loan that add up – or save up – over time. Everything else is mostly just decoration. 

“It never hurts to check what interest rate you’re on and see if you can do better,” says Marshall. “There’s almost always an option out there that could be better. Refinancing offers may not be as sweet as they used to be, but the best ones could still be better than what you’re on now.”

At the time of writing, these home loan lenders currently have cashback deals for refinancers in the Mozo database:

• Bank of Melbourne
• Bank of Queensland
• BankSA
• Defence Bank
• HSBC
• IMB Bank
• ME
• Newcastle Permanent
• Qantas Money
• RACQ Bank
• Reduce Home Loans
• Regional Australia Bank
• St. George

When comparing home loans to refinance, always check the full scope of the deal, including the comparison interest rate, mortgage features, and eligibility criteria. 

Compare refinance home loans in the table below.