Is competition driving the drop in cashbacks?

ANZ, MFAA comment on offer reduction

Is competition driving the drop in cashbacks?

ANZ has explained the rationale behind its decision to reduce its home loan cashback offer, citing competition as a contributing factor.

According to data on Tuesday, the number of lenders cashback offers in the home loan market dwindled from a peak of 36 in March, to 12 on August 15.

MFAA CEO Anja Pannek (pictured above left) said that the reduction in the value and number of cashbacks was “a step in the right direction” and encouraged lenders to make their best rate offer at the outset.

From August 26, 2023, ANZ, Australia’s third-largest bank, will halve its cashback offer for eligible home loans refinanced to the bank, from the current $4,000 to $2,000. The bank will also restrict the cashback offer to loans with an LVR of 80% or less.

ANZ’s decision to change its cashback offer is the wake of the move by Commonwealth Bank to end its $2,000 cashback offer effective June 1, followed by other major banks, NAB and Westpac, both of which have since removed their cashback offers.

In a statement provided to MPA, an ANZ spokesperson said that the bank’s decision to change its cashback offer was based on a range of factors, including “competitive pressures.”

The bank has not commented on whether it will withdraw its cashback completely, other than to clarify that it “regularly reviews” the offers it provides on home loans and other products.

“ANZ has decided to change the offer having regard to a range of factors, including business performance, cost of campaigns, financial returns, and competitive pressures,” the ANZ spokesperson said.

The bank said that it aimed to give brokers access to products, policies, offers, tools and systems needed to help them to support their clients.

From a new business perspective, ANZ currently has a $3,000 cashback offer in-place for eligible first home buyers taking out loans of $250,000 plus, to assist with costs.

“Whether it’s helping first home buyers through our $3,000 cashback for eligible first home buyers, introducing our simpler switch refinance option for eligible PAYG applicants, or providing simple income verification for self-employed applicants, we’re committed to working better together with brokers,” the ANZ spokesperson said.

Announcing the bank’s half-year results on May 5, ANZ chief executive Shayne Elliott acknowledged that the bank had grown its share in home loans, with business owners representing nearly 30% of flow. 

Revenue was up 11% on the first half of FY22, driven by “restored home lending momentum” from the previous half, and deposit margin management, Elliott said.

Lenders encouraged to ‘make best rate offer’ at the outset

 Pannek said that cashbacks were originally introduced to cover the cost to the customer of moving loans.

Over the longer-term, cashbacks have made the true costs of a loan “opaque” for consumers, and the value of cashback offers no longer makes business sense, she said.

“Cashbacks have also added complexity to the conversations our members were having with their clients and drive borrowers to switch loans more frequently resulting in clawbacks, a situation that is not sustainable for the industry,” Pannek said.

The MFAA welcomes news from lenders that make it easier for borrowers to understand their options, and to remove friction from the system for its members. 

A recent MFAA member survey indicated that many borrowers were experiencing challenges in the current environment, with successive interest rate rises adding to the cost of their home loans, Pannek said.

“We encourage lenders to put their best foot forward in assisting these customers who are working with their brokers through making their best rate offer at the outset and making discharge processes clear and straightforward,” Pannek said.

Cashback offers continue to dwindle research director Sally Tindall (pictured above right) said that March 2023 was the peak period for cashback offers. Since then, there has been a “huge shift” away from them, she said.

“Cashbacks are known to create churn in the market and there’s plenty of evidence of significant amounts of churn in the home loan market in the last 12 to 18 months,” Tindall said.

While ANZ’s cashback offer is not the highest in the market, for someone wanting to cover the costs of refinancing and stick with a big four bank, a $2,000 cashback might be sufficient, Tindall said.

“ANZ may have decided a $2,000 cashback is effective, considering the significant drop in competition in this space.” is of the view that a competitive rate over the longer term stacks up favorably against a cashback deal, particularly on larger loans, she said.

According to its ratings database, the highest cashback offer available on Tuesday is $10,000, available through Reduce Home Loans on loan balances of $2 million and above. Lenders with cashback offers still in place include ANZ, Bank of China, Bank of Melbourne, Bank of Queensland, BankSA, HSBC, IMB Bank,, ME Bank, RAMS and St.George Bank.

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