Banks offer cash-backs to mortgage customers

ScreenHunter_1508 Mar. 05 13.42

By Leith van Onselen

From Fairfax’s Clancy Yates comes news today that Australia’s banks are increasingly offering cashbacks to home buyers in a bid to sell mortgages and expand their market share:

Among the major banks, NAB’s UBank is offering new customers $2,014; the Commonwealth Bank has a $1,000 rebate for first home buyers; Westpac-owned St George, Bank of Melbourne and BankSA are all offering $1,250 to new customers; and ANZ is offering up to $1,000 to cover the costs of customers who switch banks.

Non-bank lender Better Choice is seeking to tap into concerns about fuel prices by offering new customers discounts of between 10c and $1 a litre on petrol, depending on how much they borrow.

Several of the offers have been launched in the opening months of 2014, as banks scramble to win new customers in an environment of very cheap credit.

Mortgage Choice chief executive Michael Russel, who has worked in mortgage broking for 13 years, said banks made these offers from time to time but he had never seen so many cash inducements being offered.

”I cannot recall this many banks offering this many cash rebates at the same time,” Mr Russel said…

From a marketing perspective, offering cashbacks make sense. Rather than lowering interest rates, which would need to be passed on to all borrowers, the banks can instead target incentives at new business and grow their market share at lower cost.

There is also the question of whether such cashback offers enable the banks to skirt capital rules by effectively lowering headline loan-to-value ratios, reducing their capital adequacy requirements in the process. Such cashbacks have been used by Canadian banks – albeit on a much larger scale – to side-step CMHC rules by offering 5% to 7% cash-back offers, thus effectively providing 100% finance.

Regardless, cashbacks are yet another tool for Australia’s banks to pour more credit on the housing bonfire.

[email protected]

www.twitter.com/leithvo

Leith van Onselen
Latest posts by Leith van Onselen (see all)

Comments

  1. “From a marketing perspective, offering cashbacks make sense. Rather than lowering interest rates, which would need to be passed on to all borrowers, the banks can instead target incentives at new business and grow their market share at lower cost.”

    And once again, we see the evil of usury writ large. The increasingly desperate race to conjure up ways of squeezing just a little more blood from the stone, before their “competitors” beat them to it.

    Take away their power to profit from issuing digits-at-usury, and you remove their power to corrupt, their greed incentive, and all the economic ills everyone complains about.

    • Where can I read more about your anti-usury views?

      Are you opposed to all forms of banking or just fractional reserve banking?

      • I’m not opposed to banking. Nor am I especially opposed to FR banking.

        I am opposed to the practice of Usury. In particular, the issuing of currency (exclusively, by law) in the form of debt-at-usury.

        Fractional reserve banking is simply a secondary evil, allowing the bankers to apply leverage to their most basic and fundamental profit-making tool … which is Net Usury Income.

        EDIT: This guy’s book is worth a read. I’ve only recently come across it myself, but it well summarises the basic problem –

        http://sacred-economics.com/read-online/

    • invest-magicMEMBER

      Usury or deep fried junk food or $5000 suits are all offers.

      No one is forcing anyone to accept an offer.

      What about personal responsibility?

      The bigger issue is one of moral hazard. The banking industry is arguably the only one that is actually an extension of our govt. They have an implied put that encourages risky behaviour.

      Profits I keep, losses you keep. Plus our govt will gladly oblige and protect them in a heart beat.

      Remember the ban on short selling during the GFC but only on banks! This is corporate welfare NOT capitalism.

      Capitalism is when you take risks and die when they don’t work out — No where does it give a license to raid the public purse… legally.

      But a good gig if you’re the one who has been given the free put. I don’t remember seeing a cheque in the mail when I was made a seller.

      • “No one is forcing anyone to accept an offer.”

        No one has a choice but to suffer the negative effects of usury-based money. It affects every single aspect of the economy, prices, and your life. It makes no difference whether you choose to borrow or not, you ARE affected negatively by a system that makes the only legal form of currency one that is issued by private banks, in the form of Principal debt, that owes the Principal + uncreated, non existent Usury to the bank.

        Bogus argument.

        ” The banking industry is arguably the only one that is actually an extension of our govt”

        Excellent. Now go do some research into how the system works, and maybe you will understand how they got to be so large, so powerful, and so TBTF.

        The reason is Usury.

      • invest-magicMEMBER

        Wow! The pretense of knowledge — no need to be condescending.

        Anyway, who gave the banks usury power?

      • invest-magicMEMBER

        Historically yes, but Australian banks are certainly given this power through law (inherited or created here).

        So how do we fix it?

      • Get the law changed (yes, yes, I know *rolls eyes*).

        Or, create new alternate currency systems, so there is something better and wiser to replace the present system when it inevitably implodes.

  2. No one forces a junkie to take their first hit, & yet we have them, & they’ll do whatever it takes to get their next hit, damaging everyone around them!

    But more often than not the pusher has used sly methods to get them hooked in the first place – because they’ll do whatever it takes to get people hooked – it’s their business plan!

    Even easier for this money breed of pusher is that these types have the cops turning a blind eye & backing them as well!

    • In a world where prices of everything have been steadily pushed skywards over many decades (start asking yourself exactly HOW that happened…), eventually you will reach the point where we are now; if you want to buy a shelter for your family, the vast majority MUST accept the laced heroin — and in so doing unknowingly contribute further to the root problem — by borrowing “money”, at usury.

    • migtronixMEMBER

      Better these dealers are desperate junkies themselves who always need new customers to leverage their habit off 🙂