A major bank’s move to offer retention payments and rate discounts to stop borrowers from switching lenders has inflamed broker frustration and trust concerns.
Brokers have raised concerns that retention tactics could distort competition and result in hours of unpaid work, after reports revealed Australia and New Zealand Banking Group (ANZ) is offering cash payments and sharper rates to retain customers already partway through the refinancing process.
The Australian Financial Review reported on Friday (17 April) that ANZ had recommenced offering targeted retention payments of about $2,000 to borrowers who had lodged discharge forms to refinance to another lender.
These offers are reportedly being made at the point where a client had already decided to switch, rather than during earlier repricing conversations.
To keep these customers, ANZ is also waiving fees and undercutting competitors’ pricing by roughly 15–20 basis points.
The bank, which confirmed the report to The Adviser, noted that payments and discounts were discretionary and depended on individual circumstances.
The strategy is emerging in the wake of two cash rate hikes this year, which have squeezed household budgets and triggered a refinancing wave.
Major banks, with the notable exception of ANZ, wound back broad, advertised cashback campaigns in 2023 after margin pressure and industry criticism.
ANZ itself removed its $2,000 refinance cashback for new customers in September last year while retaining a $3,000 bonus payment for eligible first home buyers.
‘Retention system is flawed’, says broker
For Matt Turner, partner and managing broker at GSC Finance, the critical issue was not that ANZ was competing hard for customers – but the point in the process where it chose to do so
He said a bank’s move to produce a cashback after a refinance was already in process was exasperating, as brokers had already done the majority of the heavy lifting.
“It’s a sense of frustration, we do the work and educate the client,” Turner said.
“It really shows that the retention system is flawed, and they will only try when the discharge is lodged.”
Turner explained that the pattern had forced him to re‑engineer his internal processes around retention, discharge timing, and client communication.
“Yes, we have needed to as there is no value to the client or to our business to get to this point,” he said.
“We do educate and provide scripts to our clients when engaging with the retention teams, and if they are a new to firm client, we will educate them on how much their bank has overcharged them while the loan has been there by not offering those best rates.”
Turner added that lender behaviour at the point of retention was increasingly a factor when he weighed up product options.
“My belief and certainly the feedback from clients, is that lenders that don’t offer their best retention offer upfront is not transparent and do not show client loyalty,” Turner said.
Looking ahead, Turner said he wanted to see concrete guardrails around when and how such incentives could be used.
He said that last‑minute cash carrots exploited borrower stress in the current economic climate and distorted genuine price discovery.
“I think there should be regulation against it as it is anti‑competitive behaviour, they prey on the vulnerability of the client by offering an incentive that for some people could provide a lot of comfort in the current economy,” he said.
“They should be forced to give the clients their best offer upfront, then have no opportunity to reprice for a further x amount of months – this is a more transparent process for clients and brokers.”
‘10–15 hours of work’ at risk
Daniel Kaminsky, senior mortgage broker at Loans4Homes, said a bank’s move to intervene with a late-stage cashback offer wiped out a considerable amount of broker labour.
“It can be extremely frustrating,” Kaminsky said.
“We always approach the existing bank or lender to put their best retention offer forward to the client before working on the client’s options and sending the discharge.”
Kaminsky estimated that by the time a discharge had been processed and a refinance was nearing settlement, his team had contributed a substantial amount of work behind the scenes.
“If a bank comes back with a retention offer this is generally at the end of the refinance application once the discharge is received, which can take between 10–15 hours of work to get the file to that point,” he said.
“Some banks even deny us access to the discharge and require the client to call up, this can add 3–4 hours of additional workload or sometimes force us to provide a cashback to ‘sweeten the deal’, which dips into our pocket.”
Kaminsky said those experiences had prompted tactical changes as to how and when his firm triggered discharge processes, depending on the lender and product.
“We have changed the discharge process depending on the bank or lender, sometimes before submission or submitting a fast refinance where a discharge isn’t needed,” he said.
He said that if banks were willing to spend thousands of dollars to keep a client, they should also recognise the effort that had gone into presenting the alternatives.
“I would say that if the bank is offering a cashback to the client, it would be fair if they did the same and offered an additional upfront to the broker considering the amount of work that was put in,” he said.
[Related: Broker mortgage share shrinks further at CBA amid proprietary push]
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