Brokers will play a key role in a new strategy by NAB that will see the lender give cash incentives to new home loan customers.
Yesterday NAB announced that it will give new mortgage customers $1,000 to kick off spring, traditionally one of the busiest times for real estate transactions.
Customers will receive a $1,000 EFTPOS card if they take out a principal and interest NAB home loan for $300,000 or more between September 22 and October 31 this year and draw down by 30 January 2015.
NAB group executive product and markets, Antony Cahill, said NAB wants to be the first choice for people buying a new home this spring.
“Buying a home is one of the biggest financial decisions many of us make and NAB is determined to help customers save money and have certainty,” Mr Cahill said.
"We have a track record for giving customers a better deal on interest rates and fees – and an extra $1,000 in the pocket this spring can help cover any unexpected costs that can crop up in the process of moving,” he said.
Westpac-owned St George, Bank of Melbourne and BankSA are offering $1,250 to new customers, while CBA is offering first home buyers a $1,000 rebate on their home loan.
“To support Australians purchasing their very first property for owner-occupation or investment, Commonwealth Bank offers a $1,000 rebate for eligible first home buyers,” a CBA spokesperson told Mortgage Business.
“Our $1,000 rebate is designed to assist these customers with the initial costs associated with home ownership,” they said.
The strategy is widespread in New Zealand and has led to problems for brokers with clawbacks and churn.
In New Zealand, major lenders such as BNZ and Westpac are offering up to $3,000 cash to customers who take out a mortgage.
“It is now so entrenched into the mortgage industry here that I don’t know how the banks will ever get rid of it,” NZ-based broker Paul Fuller told Mortgage Business.
“If you are not getting cash in some shape or form, someone will point it out to you, whether it is your solicitor or a friend – everybody knows you get cash from the banks with mortgages,” Mr Fuller said.
NAB confirmed that its $1,000 offer is available through the third-party channel.
In New Zealand, Mr Fuller said incentives have become so commonplace that they are now a discussion point between brokers and their clients.
“Clients now expect to receive a number of offers from different lenders, meaning advisers need to farm the deals to meet client’s expectations, or the clients will shop the market themselves,” he said.
“This then creates poor draw down rates and a lot of additional costs on lenders and advisers.”
While the incentives create problems for advisers around clawback and churn, lenders have become so concerned over market share that they have resorted to paying their clients not to switch banks.
“Westpac have actually paid existing clients to stay with them,” Mr Fuller said.
“A client looking to refinance their mortgages from Westpac to ASB will be told that if they stay with Westpac they will receive $3,000 and discounted rates,” he said.
The system is creating a money-hungry borrower with no loyalty, said Mr Fuller, who recently refinanced a client’s mortgage with a different lender solely for the cash on offer.
“I have one client who refinanced so he could have more spending money for his trip to Europe,” he said.
“It is actually more beneficial to switch your mortgage than it is to remain with your existing lender.”
NAB’s Mr Cahill said the offer was aimed squarely at winning customers and driving continued growth.