Over the past three years, Australian lenders have used cashback offers — typically $2,000 to $6,000 paid to the borrower upon settling a refinance — as a marketing tool to attract customers from competitors. These offers generate significant media coverage and can appear very attractive. But the evidence suggests that many borrowers who took cashback refinance deals ended up paying more in total interest than if they had chosen a lender with a lower rate and no cashback. Here is how to think about these offers clearly.
What Cashback Refinancing Offers Are and How They Work
A cashback refinancing offer pays you a lump sum of cash — typically $2,000 to $6,000 — when you refinance your home loan to the offering lender and meet certain conditions. Common conditions include: the loan must reach a minimum size (often $250,000 or $300,000+); the loan must remain active for a minimum period (usually 12–24 months, with clawback provisions if you leave early); and the refinance must be a true lender switch (not an internal refinance).
The cashback is real money — it lands in your account, reduces your effective interest cost in the short term, and can be used for any purpose. For a $3,000 cashback on a $500,000 loan, the effective interest rate saving in year one is 0.6% — which sounds significant. The question is what the total cost looks like over the full loan term.
How to Properly Evaluate Whether a Cashback Offer Makes Sense for You
Evaluate a cashback offer by comparing it against the best rate available — not against your current loan rate. This is a critical distinction. If your current rate is 6.5% and the cashback offer is 6.1% with $4,000 cash, it may look attractive. But if the best rate in the market is 5.89%, the cashback offer is still 0.21% above the best available — and the cashback only compensates for approximately one year's extra interest cost.
Also check: the clawback period (typically 12–24 months — leaving before this date means repaying the cashback); whether the cashback is taxable (generally no, as it is a bank incentive not income — but confirm with your accountant); and the total loan features (does the cashback lender include a competitive offset account and no unnecessary fees?).
Frequently Asked Questions
About the Author
Sakib Manzoor
Senior Finance Wellness Expert
Sakib Manzoor is the founder of Secure Finance and brings extensive experience in Australian mortgage broking and financial wellness. Specialising in helping clients achieve their property finance goals through personalised strategies and expert guidance, Sakib is FBAA accredited and committed to providing clear, actionable advice. All content is written to meet Australian regulatory standards and is regularly updated to reflect current market conditions.