Banks look to claw back margins

by NZ Adviser08 May 2017

Incentives such as TVs, phones and cash have been offered by banks to attract customers for years – but such incentives may be thinning as banks impose tough stress tests which make it harder for borrowers to meet lending criteria.

Mike Pero Mortgages chief executive Mark Collins told the New Zealand Herald that cashbacks were getting smaller and scarcer.

Collins said six months ago home-buyers were able to get $5,000 to $7,000 in cash from their bank by switching or taking out a new mortgage. Now, he told the NZ Herald, “we are probably getting more zeroes”.

While cash sweeteners had not totally disappeared, their size and scope had dwindled, with Collins saying it was likely to be in region of $3,000 to $5,000 and only for the right client from certain banks.

Facing increased funding costs and global economic uncertainty, Collins said banks appeared to be trying to claw back their margins.

The Herald contacted Westpac and a spokeswoman there confirmed cash payouts across the market had dropped. 

The spokesperson put the change down to customer demand, and added customers were looking beyond cash contributions towards service, rate, expertise and convenience when assessing the full value of their banking relationship.

An ANZ spokesman told the Herald it had not had a formal cashback offer in the market since 2015, although it would still negotiate a cash payment to cover costs.

"While we have no formal cashback offer in the market, in some circumstances, and as part of an overall home-loan offer, we will negotiate a cash contribution to help with costs associated with the property transaction for some home-loan customers,” the spokesperson said.

"We understand that cashbacks have been declining recently, and tend to be more in line with property transaction costs."

A BNZ spokeswoman told the Herald that cash was offered in certain circumstances to cover the costs of moving house and switching your home loan.

Collins also hinted that, in his view, bank stress tests had changed, meaning that some potential home-buyers could not meet the serviceability criteria.

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