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A third major bank has announced it would cease offering cashbacks.
Westpac has confirmed it will stop offering its $3,500 cashback offer for people looking to refinance. The major bank has confirmed it will end this offer on 30 June 2023.
The offer is still available for those who apply/applied between 31 January 2023 and 30 June 2023 and settle by 30 September 2023.
According to their websites, the major bank's subsidiaries (St. George, bank SA and Bank of Melbourne) have also set a deadline for their cashback offers, being 31 August 2023.
In addition, earlier last week (22 May), Westpac introduced a new Streamlined Refinance policy, which was designed to assist more customers to refinance their existing loans to Westpac.
While applications to refinance an existing consumer mortgage will continue to be assessed under standard serviceability criteria and document verification requirements, Westpac has said that if certain customers are unable to meet serviceability under the standard assessment criteria, a “modified Serviceability Assessment Rate” may be applied.
Brokering industry applauds cashback scrap
Westpac now joins two other major banks, National Australia Bank (NAB) and the Commonwealth Bank of Australia (CBA), which have also scrapped their cashback offers over the last few weeks.
NAB’s $2,000 cash bonus offer for new refinances of $250,00 or more is still currently available, however, it’s only open to customers who apply by 30 June 2023 and draw down by 30 September 2023.
Furthermore, CBA confirmed on 9 May 2023 that it would no longer be offering its $2,000 cashback payments on new applications for home loan products from 31 May 2023.
CBA previously flagged that the offers being put out in the market resulted in a squeeze on net interest margin, with CBA chief executive Matt Comyn suggesting at the time that strong competition for refinances has led to lenders writing loans below the cost of capital.
The major bank’s subsidiary Bankwest also confirmed it will stop offering cashbacks with its mortgage products from 31 May 2023.
ANZ is now the only major bank not to make an announcement on its intentions regarding cashback offers.
Members of the mortgage broking industry have welcomed the move to remove cashbacks, after finding that the large dollar value incentives were encouraging more borrowers to refinance — sometimes against their longer-term best interests.
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According to broker industry representatives, this ‘sugar hit’ had resulted in some borrowers refinancing multiple times in a 12-month period and had resulted in a spike of clawbacks for brokers.
Large cashback offers put into market by the major banks have also contributed to the big four regaining market share — with recent data from Australian Finance Group revealing that more than 60 per cent of AFG mortgages were lodged with the big four banks in 3Q23.
More to come.
[RELATED: Lenders begin tweaking serviceability buffers]
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