You get a free flight every year, but is Qantas’ new home loan any good?

Aviation giant Qantas has entered the home loan market with its “Qantas Money Home Loan”, on which reward points are paid to the mortgage holder for each year they have the loan.

The loan itself is actually provided by Bendigo and Adelaide Bank, with Adelaide Bank managing the loan repayments and otherwise keeping track of the mortgage.

It offers a variable interest rate of 4.67 per cent for owner-occupiers. However, that will likely rise to 4.92 per cent once last week’s rate rise of a quarter of a percentage point is passed through. The estimated upfront fee on the Qantas mortgage is $1090, assuming legal costs of $250.

Qantas has entered the home loan markets with reward points the big sell.Credit:Chris Hopkins

So, is Qantas’ home loan offer any good, or should the flying kangaroo stick to its knitting?

Pros: The mortgage holder receives 100,000 points each year over the life of the mortgage. RateCity says 100,000 points is more than enough to buy a Sydney-Los Angeles return flight, giving the points an estimated value of just under $2300.

These recurring points from Australia’s flagship airline are obviously the loan’s big selling point. The first “payment” of points is made on settlement of the mortgage. It is available both to new borrowers and to refinancers for amounts borrowed of between $300,000 and $3 million.

There is also a one-year fixed rate of 5.23 per cent and a two-year fixed rate of 5.39 per cent for owner-occupiers. Interest rates are higher for investors. You will need a deposit or equity of at least 10 per cent, plus savings to cover fees and charges such as stamp duty.

Cons: Those looking to take out a Qantas mortgage of more than $2 million need a deposit or equity of at least 25 per cent.

And while the interest rate is competitive, there are mortgages that offer “cashback” of up to $5000 on sign-up for certain borrowers, and there are mortgages without perks that have lower interest rates.

The Qantas mortgage is not available for off-the-plan or construction. While a 100 per cent offset account is available, it costs $10 a month.

Borrowers must be members of the Qantas Frequent Flyer program, membership of which may require a joining fee. Earning and redemption of Qantas points are subject to the program’s terms and conditions.

Verdict: Sally Tindall, the director of research at RateCity, says the mortgage is “not bad at all for certain types of borrowers, provided the points are redeemed for flights”.

“As soon as you start redeeming points for something of lesser value, such as shopping vouchers, it loses its shine,” she says.

That is because the value of the points, based on Woolworths shopping vouchers, is worth only $458 a year compared with spending the points on flights.

If you do not redeem the points, but rather bank them for another day, they could potentially, over time, be devalued by Qantas, Tindall says.

“Borrowers should try and negotiate down the hefty upfront fees that come with this loan and do the maths to make sure they’re going to end up ahead when compared to lower-rate mortgages,” she says.

Those with smaller loans might find they end up ahead with the Qantas mortgage, but on larger loan amounts, low-interest rates usually trump a perk, even if the perk is ongoing, Tindall says.

“Very roughly, a lower-rate loan without perks will work out cheaper for those borrowing more than about $1.3 million over the first five years,” she says.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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