Skyrocketing refinance volumes make cashback programs an expensive proposition for the banks
Commonwealth Bank has announced that it will end its $2,000 cashback offer on June 1, according to a report from RateCity.
Over the past two-and-a-half months, CBA and the other big banks have been raising rates for new customers in addition to the standard Reserve Bank rate rises, partially reversing the discounts available to new customers, RateCity reported.
Recent data from the Australian Bureau of Statistics shows that a record $21.22 billion in loans were refinanced in March, while a total of $206.86 billion in loans have been refinanced since the RBA began its current rate hiking cycle in May of last year.
At those volumes, discounts and cashbacks for refinancers have become an expensive proposition for banks, RateCity reported. As a result, the number of cashback deals available is starting to dwindle.
According to the RateCity.com.au database, there are currently 29 lenders offering cashback incentives, including all four of the major banks. That’s down from a record high of 35 in March.
According to RateCity:
- 29 lenders are currently offering cashback deals, with the majority only available to refinancers
- The highest cashback is $10,000 from Reduce Home Loans. However, this deal is for a loan size of $2 million or more and is not available at the lender’s lowest rate
- All four big banks currently offer cashback deals. However, CBA’s cashback offer ends this month
- Westpac currently offers $3,500 cashback for refinancers
- NAB offers $2,000 for refinancers
- ANZ offers up to $4,000 for refinancers and $3,000 for first-home buyers
“Cashback deals have become a hot potato for the banks, with CBA the first of the big four to drop them this year,” said Sally Tindall (pictured below), RateCity research director. “The big banks have been at the centre of the refinancing storm over the last 12 months, throwing down competitive new customer discounts and cold hard cash to tempt borrowers to switch. Now they’re looking to take shelter from it.”
“Back in February, CBA CEO Matt Comyn indicated the bank was feeling the heat from competition in the refinancing market,” Tindall said. “Today, CBA has taken yet another step away from the contest for new business.”
Tindall said the elimination of CBA’s cashback offer could steer potential customers to its competitors.
“The other big banks could very well fold on their cashback deals in coming months, but if they’re looking for growth, they’ve just been handed a reason to keep those deals on the table,” she said. “Just because one big bank has watered down its offering doesn’t mean competition in the mortgage market is about to burn out entirely.
“Over 70% of mortgages sit with the big four banks, yet there are over 100 different lenders in the market, keeping the pressure on the biggest players,” Tindall said. “The more Australians take advantage of this competition, the more likely it is to stay alight.”
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