Mortgage changers warned against cashback offers
More lenders than ever are offering generous cash incentives — some over $4,000 — to attract new mortgage customers. However, experts have warned refinancers that they should prioritize competitive interest rates over attractive benefits.
Thirty-three lenders listed in researcher RateCity’s database now offer cashback, up from 26 at the start of 2021, including Citi, which promises a $6,000 refund to those with a loan over $1 million. dollars and which go through mortgage brokers; and Reduce Home Loans, which offers $10,000 cash back on loans of at least $2 million.
Most cash back offers are only available to those who refinance – typically those with at least 20% equity in the refinanced property – and some require a minimum loan of at least $250,000 to be eligible for. the money.
However, Sally Tindall, director of research at RateCity, warns those looking to refinance that they should be careful when playing cashback, as generous offers can sometimes mask less than optimal interest rates.
“While the cash may be welcome, you could end up paying more over time in additional interest, if the loan isn’t competitively rated,” Tindall says.
“If you go for a repayment offer, consider putting the money back directly into the mortgage to reduce the debt, especially since further rate increases are likely.”
Official interest rates rose from 0.1% in May to 2.35% this week, with increases of half a percentage point in each of the past four months, after an initial rise of 0, 25%.
Reserve Bank of Australia (RBA) Governor Philip Lowe said this week the central bank’s board expects further interest rate hikes to be needed in the coming months. “And we recognize that, all things being equal, the case for slowing the pace of interest rate increases becomes stronger as the level of the cash rate increases,” he said. he declares.