Refinance cashback offers: benefits and limitations

A refinance cashback is a lump sum that a new lender pays to a borrower after an eligible home loan has been moved across from another lender. It is a marketing incentive, and its main practical benefit is that it may cover some or all of the fees involved in switching. Its main limitation is that it is paid once, while an interest rate applies for every month the loan remains open. A loan with a cashback and a slightly higher rate can therefore cost more than a loan with no cashback and a lower rate, often within two to three years.

Cashback offers are also far less common than they were. The Reserve Bank of Australia (RBA) has reported that most lenders withdrew them during the first half of 2023. Where an offer is available, it should be treated as one input into a refinancing decision, alongside the rate, the fees, the features and the period the borrower expects to keep the loan.

How refinance cashback offers work

The Australian Competition and Consumer Commission (ACCC) described the mechanism in the final report of its Home Loan Price Inquiry. Cashback offers pay a specified amount for refinancing an eligible home loan from an existing lender to a new lender. They are paid by the new lender to the borrower, and they aim to cover some or all of the costs of refinancing. The ACCC noted that, over the first half of 2020, offers ranged from $1,000 to $4,000 depending on the lender. The RBA later reported that, during the period of intense competition in late 2022 and early 2023, lenders were offering between $2,000 and $5,000.

The payment is generally made after settlement, usually into a transaction account held with the new lender or directly into the loan. The timing differs between lenders and is set out in the offer terms, so the cashback should not be relied upon to pay settlement costs that fall due earlier.

The RBA has noted that banks subtract cashback payments from their fee income. A lender that offers a cashback is, in effect, choosing to compete with an upfront payment instead of a lower ongoing rate.

Typical conditions attached to cashback offers

Each offer has its own terms and they change frequently, so the conditions below describe the general structure only. Borrowers should read the current terms published by the lender.

• Minimum loan size. Offers generally require a minimum amount to be refinanced, and some pay a larger cashback for larger loans.
• Maximum loan to value ratio. Many offers are limited to loans at or below a set percentage of the property value, commonly the level at which lenders mortgage insurance is not required.
• Refinance from another lender. Moving between brands owned by the same banking group, or switching products with the current lender, is generally excluded.
• Eligible products. The offer may apply only to certain products, which are not necessarily the lender's lowest rate loans.
• Application and settlement dates. The application usually has to be lodged by one date and the loan settled by another.
• One payment per application or per property. Splitting a loan into several accounts does not generally multiply the payment.

Cashback compared with a rate difference: an illustrative example

The following example is hypothetical and uses round numbers. It does not reflect any current rate or any actual offer. A borrower is refinancing $500,000 over 25 years on principal and interest repayments and has two options with identical fees.

• Loan A: 6.10 per cent with a $3,000 cashback. The monthly repayment is $3,252.14.
• Loan B: 5.85 per cent with no cashback. The monthly repayment is $3,175.82, which is $76.32 lower.

The table shows the additional interest charged on Loan A over time, compared with the $3,000 cashback.

Time held	Extra interest on Loan A	Cashback	Net position
1 year	$1,249	$3,000	Loan A ahead by $1,751
2 years	$2,495	$3,000	Loan A ahead by $505
3 years	$3,736	$3,000	Loan B ahead by $736
5 years	$6,196	$3,000	Loan B ahead by $3,196

In this example the extra interest on Loan A overtakes the cashback in month 29. A rate difference of only 0.25 percentage points therefore cancels a $3,000 payment in under two and a half years, and Loan B continues to pull ahead in every month that follows. If the cashback is paid straight into Loan A and both borrowers make the same monthly repayment, the break-even point moves only slightly, to month 33.

How loan size changes the result

A cashback is a fixed dollar amount, while a rate difference scales with the balance. In simple terms, 0.25 percentage points is worth about $625 a year on $250,000 and about $1,875 a year on $750,000. A $3,000 cashback therefore represents almost five years of that rate difference on the smaller loan and about 19 months on the larger one. Cashbacks are relatively more valuable on small loans and short holding periods, and relatively less valuable on large loans held for many years. The refinance calculator allows the same comparison with actual figures.

Clawback clauses and minimum loan sizes

A clawback clause requires the borrower to repay all or part of the cashback if the loan is discharged, refinanced again or reduced below a set balance within a specified period after settlement. Not every offer contains one, and the period and amount differ between lenders, so the clause should be located in the offer terms before an application is lodged. Points to check include:

• the length of the clawback period and whether the repayment reduces over time;
• whether selling the property triggers the clause in the same way as refinancing;
• whether a large lump sum repayment that takes the balance below the minimum loan size counts as a trigger; and
• whether the amount is deducted from the payout figure at discharge.

A clawback should not be confused with a prohibited exit fee. Early termination fees on new residential loans have been banned since 1 July 2011, but a contractual obligation to return an incentive is a different matter, and its enforceability depends on the terms.

Minimum loan sizes create a related trap. Borrowing more than is needed in order to reach a threshold increases the interest paid over the life of the loan, and the cost may exceed the cashback. Borrowers can confirm how much they need, and how much equity they hold, with the home equity calculator.

The decline in cashback availability since 2023

Cashbacks were at their most generous when competition for refinancing customers peaked. The RBA's April 2024 Bulletin recorded that external refinancing reached record highs in 2023 as a large number of fixed rate loans expired, and that lenders competed with discounts and cashbacks of $2,000 to $5,000. The same article reported that most lenders withdrew their cashback offers in the first half of 2023.

In a February 2026 Bulletin article, the RBA observed that promotional intensity eased from 2023 onward while the improvement in pricing largely persisted. It reported that the gap between the average new variable rate and the average outstanding variable rate had narrowed to approximately 3 basis points by December 2025. Competition has, in other words, shifted from one-off payments towards ongoing rates. Cashbacks have not disappeared entirely, and offers may still be advertised from time to time. BorrowWise has not verified any individual offer as at September 2026, and availability should be confirmed directly with lenders or through the loan comparison page.

Benefits and limitations at a glance

Potential benefits	Limitations
May cover discharge, establishment and registration fees	Paid once, while the rate applies for the life of the loan
Certain in amount, unlike a variable rate that can change	Eligible products may not carry the lender's lowest rate
Relatively valuable on smaller loans or short holding periods	Clawback clauses may apply if the loan is closed early
Can be paid into the loan or an offset account to reduce interest	Minimum loan sizes may encourage borrowing more than needed

The ACCC's inquiry made a related observation about behaviour. Short-term incentives are effective because many consumers overvalue a small immediate gain relative to a larger long-term one. The ACCC heard that existing lenders sometimes use cashbacks and temporary discounts to persuade a customer not to leave, even where the incentive saves less over time than the competing lender's rate.

Tax treatment of a home loan cashback in general terms

BorrowWise was not able to locate or open published Australian Taxation Office (ATO) guidance that deals specifically with home loan cashbacks while preparing this article, so the tax treatment is described here as unclear and no position is stated as fact. Commentary from lenders and comparison sites commonly suggests that a cashback on a loan for a borrower's own home is a private receipt, and that a cashback connected with an investment property loan may have tax consequences, for example in relation to the interest or borrowing expenses claimed. That commentary has not been verified against the ATO's own material.

Borrowers with a rental property should raise the question with a registered tax agent, or seek guidance from the ATO, before lodging a return for the year in which a cashback is received. This article is general information only and is not tax advice.

Checklist for assessing a cashback offer

1. Request a rate review from the current lender first, so that the comparison starts from the best rate available without switching.
2. List every switching cost. The ACCC estimated upward of $1,150 to move between the big four banks in mid 2020, comprising discharge, establishment and land titles fees. Those amounts are historical, and current fees should be confirmed.
3. Check for costs that a cashback is unlikely to cover, such as lenders mortgage insurance where the new loan exceeds 80 per cent of the property value, or break costs on a fixed rate loan.
4. Identify the lowest rate loan available without a cashback and calculate the interest difference over two, three and five years.
5. Read the clawback clause and compare its period with the time the borrower realistically expects to hold the loan.
6. Decide in advance where the cashback will go. Paying it into the loan or an offset account preserves its value.

Borrowers who would like assistance in comparing options may use the free assessment. A licensed mortgage broker or adviser can confirm whether a particular offer is suitable for an individual's circumstances.