Lenders roll out cost-of-living incentives to tempt mortgagors

After last month’s cash rate increase to 0.35 per cent – and with the official cash rate expected to hike up again this month and reach 1.75 per cent by the end of this year – there has been increasing focus on how rising interest rates will impact both new and existing borrowers as rates rise for the first time in over a decade and the cost of living increases.

While many lenders have been increasing both their fixed and variable rates to reflect the changing rate environment, some have since started reducing rates to attract new borrowers.

Last week, Australia and New Zealand Banking Group (ANZ) reduced its lowest variable rate to 2.29 per cent for new customers (just days after having increased it following the RBA cash rate decision) and Westpac launched a honeymoon rate of 2.09 per cent.

But it’s not just rate cuts that lenders have been using to sweeten the deal for borrowers. There has also been a growing number of offers and incentives being rolled out to attract new borrowers (whether first mortgagors or refinancers) and ensure loan books remain strong.

While sizeable cashback offers have become commonplace since the COVID-19 pandemic hit (often ranking between $2,000-$4,000), lenders are also now seeking to tap into the Australian populace’s collective concern with the rising cost of living, too.

For example, the Commonwealth Bank of Australia (CBA) has this week announced a new offer – run in partnership with telecom provider More – that offers eligible conditionally pre-approved home loan customers with access to a free nbn plan for three years (and a 30 per cent discount for existing CBA customers who sign up to More nbn plans).

According to the bank, the deal could save eligible home owners over $2,700 and comes after the big four lender found that borrowers are increasingly concerned with managing the rising cost of living and are taking steps to mitigate it.

Michael Baumann, CBA’s executive general manager of home buying, said: “We know that the rising cost of living is being felt by all Australians, particularly those looking to purchase a property in the current environment. 

“We want to support pre-approved home loan customers where we can, and that includes longer-term savings on essential and ongoing bills and commitments like internet.”

Andrew Branson, the co-founder of More, suggested that this type of customer benefit “has never been seen before” and congratulated CBA for “trying something new that will make a meaningful difference to their customers who are facing rising cost of living pressures”. 

Suncorp Bank has also kickstarted a campaign this week that targets energy price concerns; launching a new product that enables eligible Suncorp Bank home loan customers to install a range of green energy-efficient features with a reduced variable rate equity home loan offer.

The Green Upgrades Home Loan will be made available to eligible current or new Suncorp Bank home loan customers (owner-occupiers or investors) with a mortgage of at least $150,000 with a loan-to-value ratio (LVR) of 80 per cent or less from the end of June. 

It provides borrowers with between $10,00 and $25,000 to install or upgrade sustainability features to their home, such as a solar hot water system, solar batteries, home insulation or energy-efficient glazing and windows.

When announcing the new product, Suncorp Bank’s home lending executive general manager, Bruce Rush, said: “As the cost of living continues to rise, understanding and managing finances is extremely important, but there are alternative ways households can save money, while also making a positive difference for the environment.”

The bank suggested that the product was being launched “to ensure families can still afford the essentials” and “help customers save money on their power bills”.

“We all have a part to play in looking after the environment. Suncorp Bank wants to help customers make their homes more energy efficient, while saving money and saving the planet,” Mr Rush said.

With housing affordability and escalating cost of living leading the headlines in recent months, it’s perhaps unsurprising that new mortgage incentives and marketing campaigns are now playing into these concerns to get the attention of borrowers. 

And, with monthly refinancing activity (particularly for owner-occupiers) still breaking the $10-billion mark each month, competition between lenders will likely only continue to ramp up as they look to take a bigger piece of the pie. 

As NAB chief executive Ross McEwan told analysts recently: “There will be more refinancing. People will look as their interest rates go up, to what are their options?

“We need to be ready for that and we are, for customers looking at their optionality, particularly as they’re coming off a fixed rate and [they’ll say] ‘where do I go to next?’

“That’s something certainly in our mindset here to be all over. It’s going to be a competitive marketplace going forward, there are 160 players in this market at the moment.”

[Related: Mortgage price wars to rage on through rate rises] =