Banks fight for customers in craziest home loan war since the GFC

The home loan market is currently in a very competitive state, with almost 50 lenders offering incentives such as free NBN access and up to $10,000 cashback in order to gain market share. This intense competition has been driven by the unprecedented circumstance of a high level of refinancing due to rising interest rates and ultra-low prior rates, creating “a huge pot of gold for the banks” according to Sally Tindall, an analyst at financial comparison service RateCity.

National Australia Bank chief executive Ross McEwan has described the level of competition in the market saying he is happy for the bank to grow below system, while Bendigo and Adelaide Bank boss Marnie Baker said the competition was “crazy” and suggested her larger rivals were acting irrationally. Commonwealth Bank has even admitted to writing unprofitable loans as it fights for market share against Macquarie, ANZ and Westpac. Nicole Cannon, a mortgage broker with Pink Finance, has said she has seen – for the first time in her two-decade career – “people wanting to refinance in the first 12 months, purely because they’re chasing cashbacks”. Investment bank analysts have also told clients that CBA had accelerated its loan growth late last year, with “each additional rate rise now an incremental headwind” according to Barrenjoey banking analyst Jon Mott.

The competition is also affecting smaller lenders, who have higher funding costs, with Resimac chief executive Scott McWilliam stating that the big banks are “doing everything they can to retain” customers rolling off fixed loans, describing an “aggressive” market driven by promotional offers and a willingness to write unprofitable loans. Canstar data shows CBA’s Unloan digital mortgage is currently winning the race for loan-to-value ratios of less than 80 per cent with a 4.44 per cent interest rate and comparison rate of 4.35 per cent. In summary, banks are currently fighting an intense battle for market share in the home loan market, offering a range of incentives including cashback and free NBN access in order to gain customers. This has led to some borrowers refinancing within a year for the cashback and banks writing unprofitable loans. Smaller lenders are being affected by the competition, with the big banks currently winning more refinancings due to cashback offers.