Cashback ‘sugar hits’ aren’t the answer to mortgage relief

ANALYSIS

With expectations growing that interest rate cuts will be off the table in 2026, borrowers should be cautious about refinancing for cashbacks before they’ve weighed up the full home loan costs and savings.

With the holiday season approaching, and the Reserve Bank of Australia expected to hold the cash rate at 3.6 per cent at their December meeting, lenders are aggressively targeting new clients with mortgage refinance offers of up to $10,000.

Leading into 2026, borrowers should consult their broker to check what option is better for them longer term.

Cashbacks can be a sugar hit that don’t always deliver long-term benefits to customers.

Industry predictions suggest customers will have to wait longer for more rate cuts. We know that’s disappointing for families who were relieved to see the first cuts in years over 2025 and counting on more in 2026, on the back of earlier commentary.

Sam White, Loan Market’s CEO has warned Australian homeowner’s about quick cashback’s that can set them back in the long run.

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But cashbacks aren’t always a substitute for longer-term mortgage savings. Even with the costs of Christmas around the corner, borrowers should be wary of what a one-off payment in their pocket is worth in the long term.

Three of the four major banks – NAB, CBA and now ANZ- now believe the cash rate will remain on hold well into 2026.

Cashbacks are a tactic to win new customers – they’re not the right solution for everyone. Cashbacks can come with higher interest rates, additional fees, inflexible terms and products that aren’t suited to the customer.

Mortgage brokers are bound by law to act in the best interests of their clients, and that’s why we don’t recommend moving lenders just for a cashback.

Mr White says cash backs can be traps.

Good brokers deep dive into the needs of their customers for strategies that support their evolving needs. A good broker is an ongoing partner for their clients over the life of their loan. They use their relationships and expertise to keep customers at competitive interest rates, and provide ongoing finance solutions based on the clients’ circumstances.”

There are still some borrowers paying loyalty tax at their existing lenders that costs them hundreds – and sometimes thousands – of dollars a year in repayments.

​​Many people are paying far more than they should with their existing lender. Life becomes busy and things like checking up on your interest rate gets put on the backburner.

A good broker will check your interest rate for you so you can be more proactive in keeping it competitive.

Homeowners should be looking closely at their home loans in the new year. Picture: Daily Telegraph / Monique Harmer

3 tips for borrowers heading into 2026

1. Don’t just choose a loan for its cashback. A one-off financial incentive like a cashback shouldn’t overshadow the long-term suitability of a loan’s features, interest rate, and fees.

2. Weigh up fixed vs. variable. You may find some fixed rates that are lower than variable. Your decision between fixed and variable comes down to your personal circumstances and preferences. A fixed rate can be helpful should interest rates predominantly increase during your loan term, but could also be restrictive should they predominantly decrease. A broker will help you consider your personal financial circumstances, risk tolerance, and future plans when deciding.

3. Just because rates are stabilised doesn’t mean you shouldn’t continue to check if your rate is competitive. Even if the outlook is for no foreseeable rate cuts, there are differences between one lender’s rates and the next, meaning regular rate checks and reviews are essential to ensure you are not paying more than you need to.

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Sam White is CEO, Loan Market

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