Banks risk significantly damaging their vital networks of mortgage brokers by chasing short-term market share gains with exclusive cashback offers, an industry body has warned.
Finance Brokers Association of Australia (FBAA) chief executive Leo Gagic has warned lenders against using cashback incentives to chase market share at the expense of broker relationships, as weakening mortgage demand intensifies competition for borrowers.
The warning comes after Equifax reported that mortgage demand fell 19.2 per cent year on year in September, largely due to the official cash rate reaching a 15-year high.
Gagic began by acknowledging that lenders were responding to difficult trading conditions, with upfront payments offering an immediate attraction for borrowers.
“The mortgage market is highly competitive and, with application volumes under pressure, it is understandable that lenders are looking for ways to attract customers and grow market share,” he said.
“Cashback offers and other incentives have once again become a prominent feature of the lending landscape, providing borrowers with tangible benefits and encouraging engagement in a challenging environment.”
Cashbacks, commonly worth $2,000–$4,000, reward borrowers for refinancing or taking out eligible purchase loans. Current offers include up to $4,000 from IMB BANK and $3,000 from ME Bank, while BankVic also competes through membership-based incentives.
Gagic stressed that the association supported competitive offers that encouraged lenders to improve their products and sharpen customer value.
“From the FBAA’s perspective, competition is healthy and essential. It drives innovation, improves customer outcomes, and encourages lenders to continually refine their products and services,” he said.
“Consumers ultimately benefit when lenders compete to deliver the strongest value proposition.”
He added that this support also extended to major promotional campaigns, provided lenders operated within their legal obligations.
“Lenders are absolutely entitled to offer cashback incentives and compete aggressively for business within the required legal and regulatory guardrails,” he said.
Channel access under scrutiny
However, Gagic warned that the benefits of competition could be undermined when access to an incentive depended on how a borrower approached the lender.
“The issue is not the incentive itself, but ensuring competition occurs in a manner that supports consumer choice and treats all origination channels fairly,” he said.
That tension has persisted well beyond the Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and Westpac withdrawing from headline cashback campaigns in 2023, largely due to the banks seeking to protect their margins.
Selective retention payments remain contentious, particularly when offered after brokers have undertaken refinancing work.
Gagic cautioned lenders against pursuing immediate volume gains without considering the consequences for their established distribution partnerships.
“Short-term market share gains should not come at the expense of long-term channel relationships that are fundamental to a competitive and sustainable lending market,” he said.
With brokers accounting for 81.6 per cent of new residential lending in the June quarter, unequal access to offers substantially affects the industry’s dominant origination channel.
Gagic added that the potential for conflict extended beyond outright exclusions to differences in the propositions available through competing channels.
“The challenge is not whether lenders offer incentives, but how they do so. When offers are only available through selected origination channels, or one channel receives a materially different proposition, the potential for channel conflict increases,” he said.
“Brokers continue to play a critical role in helping consumers navigate increasingly complex lending decisions and originate a significant share of Australia’s mortgage market.”
The friction is evident in retention practices, with Australia and New Zealand Banking Group (ANZ) confirming discretionary cash payments and discounts following April reports of approximately $2,000 offers to customers seeking discharge.
At the time, brokers heavily criticised interventions arriving after substantial refinancing work, therefore leaving that work unpaid.
Gagic argued that maintaining consumer choice required transparent offers accessible regardless of the customer’s preferred route to a lender.
“The FBAA believes incentive programs are most effective when they are transparent, accessible and support consumer choice regardless of how a borrower chooses to engage with a lender,” he said
“A strong lender-broker partnership is built on trust, consistency, and a shared commitment to customer outcomes.”
The cost beyond upfront cash
Refinancing incentives also intersect with clawback arrangements, under which brokers can lose upfront commission when customers leave a settled loan, commonly within 12–24 months.
This exposes brokers to repayment obligations even where another lender’s promotion helps attract the customer.
The Mortgage and Finance Association of Australia’s (MFAA) 2026 State of Mortgage and Finance Broking Report found that median reported gross clawbacks reached $11,442 in 2025, up 16.5 per cent, based on matched aggregator data.
Gagic said lenders needed to assess promotional success against the longer-term commercial value of maintaining equitable distribution relationships.
“While a promotional campaign may deliver a short-term uplift in volumes, lenders should also consider the longer-term value of maintaining equitable relationships across all distribution channels,” he said.
“Australia’s lending ecosystem works best when lenders, brokers, aggregators, and direct channels operate within a framework of mutual respect and healthy competition. Growth and market share are important objectives, but fairness and consistency remain equally important.”
Rather than calling for incentives to be phased out, he urged lenders to structure them around accessibility and durable partnerships.
“By ensuring incentive programs are accessible across channels, lenders can compete effectively while preserving the partnerships that support a strong, competitive, and consumer-focused mortgage market,” Gagic said.
[Related: Discharge practices worsen as brokers lash banks]
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