The number of lenders promoting cashback offers has more than doubled since the onset of the COVID-19 crisis, enticing over 130,000 refinancers, a new analysis has revealed.
According to an analysis from comparison website RateCity, the number of lenders offering cashback deals to refinancers has more than doubled in response to the economic fallout from the COVID-19 crisis.
At present, a record 29 lenders across the mortgage market are offering cashbacks of up to $4,000, up from just 12 lenders in February.
Accordingly, refinancing activity has spiked, with the latest data from the Australian Bureau of Statistics (ABS) revealing that 137,372 loans were refinanced in the five months from April to August.
RateCity’s research director, Sally Tindall, said the record increase in cashback offerings was a reflection of the competitiveness of the mortgage market.
“The rise in refinancing is forcing banks to be more competitive than ever,” she said.
“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.”
However, the RateCity analysis found that, while lucrative in the short term, mortgage products with cashback offers can be costly in the longer term.
RateCity compared the cashback specials from the big four banks and their subsidiaries to the lowest rate options on the market, finding that cashback deals were “significantly more expensive” after five years.
But according to Ms Tindall, lenders are increasingly offering specials on their lower rate loans.
“While a low ongoing rate typically trumps a sign-up special over the longer term, if [a borrower] refinances regularly, and knows how to drive a hard bargain on rate and fees, [they] could end up ahead in the first couple of years,” she added.
Ms Tindall urged borrowers to carefully consider the terms and conditions of a product before committing to the deal, ensuring it’s best suited for their circumstances.