NAB to end mortgage-switch cashbacks a month after CBA

Intense home loan competition is cooling with major bank NAB following lender CBA’s lead in doing away with cashback offers to lure new customers.

NAB chief executive Ross McEwan has vowed to make “deliberate choices about … where to pull back”.

National Australia Bank will end its $2000 cashback offer for new loan refinancings by June 30, making it the second of the big four lenders to drop the costly incentive after intense competition for mortgages has hurt margins.

Red-hot competition in the mortgage market is slowly cooling down, with NAB’s deadline for the bonus to end coming a full month after Commonwealth Bank drops its $2000 cashback offer for new and refinanced loans on May 31.

The end of cashbacks at NAB comes after chief executive Ross McEwan last week said intense competition had forced the bank to sell loans at “sub cost of capital” as it was trying to hold onto existing customers and at the same time compete for new.

NAB shares plunged on the day, as the bank reported a fall in cash earnings at its personal banking unit, which had been hit by lower interest margins even as Mr McEwan vowed to make “deliberate choices about … where to pull back”.

About 29 lenders currently offer cashbacks for new loans, including the four majors, according to RateCity, which tracks home loan rates.

But research director Sally Tyndall said all banks had used the RBA’s eleventh cash hike to drop the big discounts they had on the table for new customers.

“And now we’ve got CBA and NAB withdrawing their cash back offers. This is unfortunately watering down the intensity of competition in the market,” she said.

On Tuesday, just as CBA announced it would no longer offer cashback payments starting from June 1, chief executive Matt Comyn said competition in the home loan market would moderate.

The bank offers a $2000 cashback for new home loan customers.

The nation’s largest lender has also increased some of its home loan interest rates by more than the RBA’s 0.25 percentage point increase for new loans.

Its Extra home loan and Wealth Package mortgage will cost an extra 0.35 percentage point to stand at 5.87 per cent and 5.79 per cent each.

Ms Tyndall said cashback offers were tempting for customers but finding a good deal on the mortgage rate was often cheaper for borrowers not refinancing regularly or those who might struggle with repayments.

“Cold hard cash at a time when a lot of families are struggling to make the budget add up because of these rate hikes can be incredibly tempting,” she said.

“We found by crunching the numbers that a lower variable rate can have often trump a one-off perk like a cashback, particularly on larger loans and especially in the longer term.”

ANZ Banking Group offers new customers $3000 for first-home loans and $4000 for refinanced loans, while Westpac Banking Corporation offers $3500 for new customers refinancing their loan.