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The decision by a number of high-profile banks to withdraw cashback offers for new-to-bank refinancing customers has been welcomed, with Get Real Finance owner Kelly Cameron saying it will benefit broker businesses.
This week both Suncorp and ING Australia both confirmed they would end their refinance cashback offers. Suncorp’s offer will end on June 2 while ING will continue its cashback only until 30 June.
ANZ is the only big four bank that has not announced that it will scrap its cashback deal.
ING Australia head of sales and distribution Glenn Gibson said the move from ING was in response to “changing market conditions”.
“It is also a result of feedback myself and our team have received as part of our ongoing engagement with brokers,” he said.
Cameron (pictured above) said the removal of cashback offers was “something that has been needed for some time” in the industry and she was highly supportive of the change.
She said there were many examples of clients who had taken advantage of the market to refinance and receive a cashback and new rate – even if was only for a slight rate discount.
This was despite Get Real Finance’s professional approach to retaining and servicing existing clients, with a team and resources dedicated to repricing and reviewing client loans every six months.
Although Cameron said many clients were “innocent” in not fully understanding how brokers were paid, the result was having a large impact on brokers, causing clawbacks or double handling of deals.
“In terms of clawbacks, the percentage used to be less than 2% of gross turnover. That is now sitting at just over 3.5%, which is a big amount of money being clawed back every month,” she said.
Cameron said these were rarely being rewritten by Get Real Finance, but instead being refinanced somewhere else or happening due to uncontrollable circumstances, like a marriage breakdown.
There are cases involving an “intense amount of effort” from a broker that are going unrewarded, she said.
“I have been in this business nearly 25 years, and we put a lot of effort into existing relationships with clients. It is my preference to spend time educating them on what they could do next.”
In just one example, Cameron said Get Real Finance supported a client who purchased an off-the-plan block of land that took nearly two years to settle, followed by the building of a home.
The deal involved doing pre-approvals four times to keep them valid, and navigating challenges such as placement with a lender when the client needed maternity leave after having another baby.
“After finishing the construction, the client wanted to consolidate their finances and refinanced to get a cheaper rate. We had done so much work, were paid once, and now we get a full clawback.”
Cameron has called for the industry to support business sustainability by lobbying for a change that would allow brokers to charge customers if they refinance within a certain time period.
Head of broker partnerships at Suncorp, Troy Fedder, said it was constantly reviewing offerings to our brokers partners and customers to ensure we are providing leading products and services.
“We value the feedback of our customers and broker partners,” Fedder said. “We will continue tooffer them leading service in the home lending space with consistently fast turnaround times and innovative products and services that meet their needs.”
Data from RateCity.com.au indicates 30 lenders are currently offering a cashback incentive to new home loan customers, and that six of these have announced their cancellation.
Research director Sally Tindall, said “contentious” cashback deals were “dropping like flies”.
“The current market churn is putting pressure the banks’ profit margins. This is a collective call for calm from some of the nation’s biggest lenders,” Tindall said.
“ANZ is the is the only big four bank still holding on to its cashback offer, but you’d have to think its days are numbered. The bank has said it intends to stay at the forefront of the refinancing fight, but it’s a fight ANZ may eventually have to concede to profit margin pressures.
