Cashback Home loans in Sep 2025

It’s an offer that’s hard to ignore. You’re refinancing your mortgage in Perth or perhaps buying your first place in Parramatta, and the bank dangles a tempting carrot: sign with us, and we’ll drop $4,000 straight into your account. For many Australians staring down the barrel of rising living costs and the great Aussie dream of home ownership, that cash feels like a lifeline. It’s money for the moving truck, a new fridge, or simply a buffer against the next rate hike.

But is it truly free money? Or is it a cleverly disguised hook, pulling borrowers into a more expensive long-term deal?

The Australian mortgage market is highly competitive. With the cash rate at 4.10% in mid-2025, lenders are working hard to attract new customers. This has led to a surge in cashback offers, which are meant to stand out and draw borrowers from other banks. Both large and small lenders now use these deals regularly. However, behind the appeal of a few thousand dollars, there are often higher interest rates, extra fees, and important regulations that borrowers should be aware of.

The most significant drawback of a cashback home loan is the interest rate. It's almost always higher than an equivalent loan without the upfront cash. How much higher? The premium can often reach between 0.50% to 1.00%.

Beyond the rate premium, a minefield of hidden costs can detonate the value of a cashback offer. If you’re refinancing, the biggest danger is the break fee on your existing loan. These costs, especially for breaking a fixed-rate mortgage, can easily exceed the cashback amount received, leaving you out of pocket. Then there are the new loan’s fees: establishment fees, valuation fees, and ongoing annual package fees that are sometimes higher on cashback products. Lenders aren't giving money away; they're pricing the "gift" into the overall cost of the loan. A borrower who doesn't do their homework risks switching to a less competitively priced loan than the one they are currently using.

So, why do lenders push these offers so hard? It’s a simple game of acquisition. In a market where interest rates are relatively high and borrowers are actively shopping around, a lucrative cashback offer is a powerful selling point.

These strategies have a real impact on Australian society. For first home buyers, who often struggle to save enough for a deposit, a cashback can help cover some of the upfront costs in a market where a 20% deposit is difficult to reach. It can make home ownership seem more possible and may improve how people view their bank, making it seem more supportive.

However, these offers can also increase socio-economic differences. Research shows that cashback deals and the online platforms promoting them are used more by higher-income city buyers. This can make it harder for regional buyers, increasing the gap in home ownership between urban and rural areas.

This aggressive marketing hasn't gone unnoticed by the corporate watchdog, the Australian Securities and Investments Commission (ASIC). The regulator has voiced serious concerns that cashback offers could incentivise poor consumer outcomes and potentially breach critical lending laws.

At the heart of the issue are two key obligations. First, the Best Interests Duty, which legally requires mortgage brokers to act in the best interests of their clients. ASIC has warned brokers that recommending a loan based solely on an attractive cashback offer, rather than considering the loan's overall suitability and cost-effectiveness, could constitute a breach of this duty. A broker must prioritise the client's long-term financial well-being, not a short-term sugar hit.

Second are the responsible lending obligations under the National Consumer Credit Protection Act. This framework requires lenders to ensure that they do not provide a loan that is unsuitable for the consumer. There is a real risk that a borrower, dazzled by a cashback, could be steered into a loan product that they can't genuinely afford over the long term, especially if interest rates rise further. ASIC now has explicit powers to intervene when a product is deemed likely to result in significant consumer detriment.

To combat this, ASIC is pushing for greater transparency. The regulator is proposing updates to its guidance on Product Disclosure Statements (PDSs), aiming to require lenders to be more transparent about how cashback incentives affect the total cost of a loan. The goal is to strip away the marketing spin and present the numbers in clear, unambiguous terms.

This push for transparency is being supercharged by the rollout of the Consumer Data Right (CDR). The CDR empowers consumers to securely share their financial data with accredited third parties, such as comparison sites or budgeting apps. This will make it far easier to compare loan products holistically, shedding a bright light on the true cost of cashback deals and fostering a more competitive and transparent market.

While borrowers weigh the pros and cons, mortgage brokers are stuck in a particularly tricky position. On the one hand, cashback offers are a powerful tool for attracting new clients. On the other hand, they fuel a cycle of refinancing that can decimate a broker's income through a nasty mechanism known as "clawback."

Here’s how it works. A broker is paid an upfront commission by the lender when the loan is settled. They also receive a smaller, ongoing "trail" commission for as long as the loan remains active. However, if a client refinances and pays off the loan within a set period (typically the first two years), the lender "claws back" a portion, or sometimes all, of that upfront commission from the broker.

With cashback offers encouraging borrowers to refinance every 3 to 4 years in pursuit of the next deal, brokers are constantly at risk of clawbacks. It’s a significant source of stress and financial instability in the industry, with one report finding that 28% of brokers are emotionally impacted by them. This creates a difficult balancing act: do they promote a loan with a great cashback that the client wants, knowing it might lead to a clawback in 18 months?

Smart brokers are adapting. The best strategy is proactive and transparent communication. This involves educating clients on the long-term implications of chasing cashbacks and the total cost of their loan. By building a relationship based on trust and holistic advice, rather than just the latest deal, brokers can foster genuine loyalty that outlasts any single cashback offer. Many are also diversifying which lenders they work with and are actively advocating for fairer clawback policies across the industry.

For most Australian borrowers, making sense of these offers means being cautious and doing the maths. The cashback is not the most important part. The best choice is the loan with the lowest total cost for the time you plan to have it.

So, how do you make the right call?

1. Look Past the Headline. The first number you see is the cashback. The number you should care about most is the comparison rate. This rate bundles most of the known fees and charges, providing a more accurate picture of the loan’s true cost.
2. Do the Maths. Use a mortgage calculator to compare a cashback loan with a higher rate against a non-cashback loan with a lower rate. Project the costs over three, five, and thirty years. The results might surprise you.
3. Read the Fine Print. What are the eligibility criteria? You often need a minimum loan amount and a maximum LVR (usually 80%) to qualify. What are the upfront, ongoing, and exit fees? Are there penalties for paying the loan off early?
4. Factor in Switching Costs. If you’re refinancing, get a precise break cost figure from your current lender. Add any new loan establishment fees to that number. Does the cashback still cover these costs?
5. Consider the Features. Don't let a cashback distract you from loan features that could save you thousands, like a 100% offset account or the flexibility to make extra repayments without penalty.

Ultimately, a home loan cashback is a financial product, not a free gift. It usually comes with higher interest rates and fees over time. The best borrowers are those who carefully check the total cost before making a decision. While the cash can be appealing, choosing a loan with better long-term value is usually the wiser option.

Written by

Pravin Mahajan

Founder

Pravin Mahajan is a seasoned technology leader with deep expertise in financial innovation and product strategy. He focuses on leveraging AI and automation to streamline financial processes, making them more accessible and efficient. Passionate about digital transformation, Pravin drives innovation in fintech, helping businesses and consumers adapt to an evolving financial landscape. His insights on technology, finance, and product strategy are widely recognised in industry forums.