NAB to scrap cashbacks

From 30 June, new mortgages written with NAB will no longer be eligible for cashback offers.

Currently, the major bank is offering a $2,000 cash bonus to eligible customers who refinance their existing home loan with NAB.

The cash bonus, available on new refinances of $250,000 or more, will now only be available to customers who apply by 30 June 2023 and draw down by 30 September 2023.

The bank has confirmed that it will not be offering cashbacks beyond this date.

While the bank has not issued a statement about the end of its cashback offer, its senior executives have made several comments about cashbacks and how they are distorting the market in recent months.

Speaking on a media call while releasing the bank’s 1H23 results earlier this month, NAB CEO Ross McEwan commented: “I think I’ve been on record way before we said we were going to be cautious about what we wrote in the … next 12 months of being not very happy with cash backs …

“It is a competitive marketplace [and] some of the businesses are feeling like they have to have it to get the business. I’d rather be competing on a service delivery.”

He noted that some cashbacks had been up around $4,000 (if not higher), with lenders having updated their offers to outcompete one another.

He told journalists: “What I have said is that we are still writing home loan mortgages. You will notice that we actually have had a little bit of growth in the book in the last six months across the bank, in home mortgages, so it’s not that we are out of the market at all.

“But we’ve said that we want to be righting the business at a level of cost of capital but we also want to maintain our customer relationships, so there is business being written in the bank sub cost of capital. It’s just not a market I’ve chosen to grow in, as we were for the 12 months prior to this period of time.”

Mr McEwan flagged that UBank is no longer offering cashbacks and NAB’s cashback is now around $2,000.

“I think cashbacks look like they’ve been coming down over the last six to 12 months, which is probably a good thing,” he said.

Looking to the future, the NAB CEO said the major bank would “continue to maintain a disciplined approach in home lending” and be focused on supporting mortgage customers facing increased cost-of-living pressures (including through proactive customer engagement with customers rolling off fixed rate).

Similarly, Rachel Slade told the AFR Banking Summit in March that she “hated cashbacks”, stating: “I look forward to the day where they don’t exist in the market … We do try to have that conversation with the customer to explain how they might think about [cashbacks] in terms of the life of their loan.”

More lenders pulling cashbacks as focus returns to NIM

NAB has become the latest lender to cease offering cashbacks after CBA and its subsidiary Bankwest confirmed earlier this month that they would stop cashback offers from 31 May.

Members of the broking industry have been welcoming the moves, with the association heads telling The Adviser recently that they hoped more lenders would follow suit. (However, a Westpac spokesperson told The Adviser on Friday (12 May) that the bank's position on cashbacks "has not changed". ANZ has not responded to requests for its position).

The managing director of the Finance Brokers Association of Australia (FBAA), Peter White AM, commented: “We welcome this and call on other banks to follow. We would rather see banks provide a commitment to not move interest rates outside of the movement of cost of funds.

“We understand that in some cases, cashbacks bring a benefit to borrowers, but we also know that it can result in borrowers paying more for the total cost of refinancing than they receive in a cashback. We need more transparency from banks not gimmicks.”

Similarly, the CEO of the Mortgage & Finance Association of Australia (MFAA), Anja Pannek, said: “While competition is good for consumers and cashbacks are a product of competition, the increasing use of these types of incentives at heightened levels is not good for the long-term sustainability of our industry. We have been pointing this out for some time.

“Our view is that cashbacks make the overall costs of a home loan less transparent, introduce complexity, and, unfortunately, have created downside financial risk for brokers.”

[Related: Industry welcomes bank’s move to scrap cashback]