Westpac pulls back from mortgage wars, ANZ last bank standing in cashback fight

Westpac announced on Friday it was pulling back from the mortgage wars, signalling a June 30 deadline for its remaining brands to tempt customers with cashbacks.

Westpac will dump its cash backs on home loans, leaving ANZ the last big bank standing in the mortgage wars. Picture: Getty Images

Some are calling it the end of the end, as Westpac announced on Friday it was pulling back from the mortgage wars, signalling a June 30 deadline for its remaining brands to tempt customers with cashbacks.

In a note to brokers on Friday the banking giant said it would move to end cashback offers for borrowers at its RAMS, BankSA, and St George brands.

Borrowers will be required to apply by June 30, with loans required to settle by October 31, or they will miss out.

Meanwhile, Westpac says it is considering “further strategic options” for RAMS after pulling the sale of the mortgage broker franchise following an unsuccessful Morgan Stanley-led sales ­campaign.

Westpac sources signalled the bank was taking the cashback move to return the mortgage book returns to the desired ­position.

The bank’s former head of consumer, Chris de Bruin, resigned in July last year, as Westpac struggled against rivals ANZ and Macquarie in the mortgage market. Jason Yetton stepped in to take charge of Westpac’s retail operations, which have gone backwards in recent years.

Westpac has already walked back its mortgage offers, dumping its cashback offers on the Westpac and Bank of Melbourne brands in May last year, warning borrowers to settle by September 30 or risk missing out on $3500.

The move leaves only ANZ as among the big four with cashbacks in the market, as the Melbourne-based lender works to grow market share on the back of its acquisition of Suncorp.

RateCity research director Sally Tindall said only nine lenders were now offering cashbacks in the market, with ANZ’s offer taking pride of place.

Ms Tindall said ANZ was clearly “very happy with their strategy” which is offering the bank “growth over profit”.

“It will be interesting to see if ANZ will keep their cashback,” she said.

At the peak of the mortgage wars almost 35 lenders were offering cashbacks to borrowers looking to switch. But alongside the big banks is “maverick” lender Macquarie, which has pushed into home borrowing, powered by the investment bank’s balance sheet and deep investments in back-end decisioning systems.

Macquarie, which reported its results on Friday, revealed it had grown its home lending book by 10 per cent to almost $120.4bn, up from $109bn last year.

Ms Tindall said Westpac’s move was “the end of the end” of the mortgage wars. “It’s not the end of the beginning,” she said.

The announcement comes ahead of Westpac’s interim earnings results on Monday, with the bank set to reveal the cost of months of fierce competition in the mortgage market as the big bank fights it out with rivals CBA, ANZ, and NAB for market share.

NAB’s results on Thursday revealed the effects of the price competition, with the bank posting a 29 per cent writedown in profits from its personal banking arm.

NAB warned it was writing almost two in three loans below the cost of capital, as the lender was forced to chase borrowers in a race to the bottom.

Sources indicated Westpac had made the move to quash its cashback offers amid a slowdown in the refinancing market.

Banks have been seeking to capitalise on a frenetic refinancing market, driven by many borrowers rolling off record low-cost home loans locked in at the depths of the Covid-19 pandemic.

JPMorgan analyst Andrew Triggs said Westpac’s loan growth had been solid, but below rivals ANZ and NAB. In a note to investors he warned Westpac was facing a 5bps reduction in its lending margins to 1.79 per cent, noting the bank was “more exposed to mortgage market pressures” but this was “being offset by higher replicating portfolio benefits”.