RateCity said there were home loan interest rates at much lower levels than the average being offered, but most were for people refinancing existing loans.

RateCity’s Sally Tindall said the big win for borrowers was not so much from the cashbacks being offered but in the refinancing with the difference in interest rates between some lenders more than 1 per cent, which could cut thousands from a loan over the longer term.

RateCity said the highest cashback on offer for a $500,000 loan was $4000 and that was on offer from 10 lenders, including the ANZ, Bank of Melbourne, BankSA, Defence Bank, ME Bank and St George.

The average mortgage rate was currently 5.86 per cent, but there were cheaper loans targetting refinancing at 4.5 per cent and the lowest on offer was 3.99 per cent from Hume Bank, which increases to 4.49 per cent after two years.

There was also higher cashback of $10,000 from Reduce but it was on a loan of $2 million or more.

Tindall said while the cashback offer was tempting it was the lower interest rate that was particularly attractive, but she said it may mean people have to be prepared to refinance regularly to make the most of the strategy.

“Whether you opt for a cashback deal or a low variable rate, either option is likely to be better than staying with your current lender on a variable rate, particularly if you’ve had your loan for a number of years and haven’t haggled for a better rate recently,” Tindall said.

She used the example of a borrower with a $500,000 debt and 25 years remaining on their loan. If they refinanced from the average variable rate to one of the lowest in the market, the saving could be as much as $20,000 in the next three years, including the costs of refinancing and assuming the cash rate was in line with forecasts from Westpac.

“Someone with a $1 million loan refinancing from the average rate to one of the lowest could save almost $40,000 in the next three years,” she said.

RateCity’s tips for refinancing included checking the equity in your home. If you own more than 30 per cent of your property you could be eligible for a discount on your mortgage, but if you own less than 20 per cent refinancing could be expensive.

It said it was important not to extend your loan time line. “If you’re five years into a 30-year loan term, then ask your new lender for a 25-year loan term,or shorter if possible. Extending your loan back to 30 years may lower your repayment but you’ll pay for it in the long run.”If you keep paying the same amount as on your previous loan you’ll save on interest and build a buffer for down the road.

“While cold hard cash offered by lenders to tempt you to switch can be appealing, beward of taking a cashback deal at the expense of a higher rate.”

RateCity said people who refinanced should also push the new lender into cutting upfront fees.