Banks in New Zealand are increasingly offering cash payments to existing customers to encourage them to stay, reflecting heightened competition in the mortgage market. This follows a period where lenders were offering substantial cashback incentives—sometimes up to around 1% or more of the loan value—to attract new borrowers, prompting other banks to match these offers.

Now, that competition has extended to retaining customers. Instead of only rewarding new lending, banks are also providing “retention payments” when clients come off fixed rates or consider refinancing. These payments are typically lower than new lending cashbacks, generally sitting around 0.25% to 0.4% of the loan.

Jeremy Andrews of Key Mortgages says these offers need to be viewed in context. “What people can get will depend on how long they’ve had their loan, whether they’ve had cashback before, and their equity position,” he explains. He also notes that banks may be reluctant to offer incentives if a refinance would leave the client financially worse off, particularly where break fees or higher rates apply.

While cashback offers for switching banks can appear more attractive on the surface, the real benefit is often reduced once legal costs, time, and potential penalties are considered. In many cases, the difference between switching and staying may be marginal.

As Jeremy Andrews highlights, this creates an opportunity for borrowers to negotiate. Rather than automatically moving lenders, clients can often use competing offers as leverage to secure a better deal with their existing bank—while avoiding unnecessary costs.

At Key Mortgages, the focus is on looking beyond headline cashbacks to assess the full structure of a loan, ensuring any decision supports long-term financial outcomes rather than just short-term incentives.

Full article here: https://www.nzherald.co.nz/business/banks-are-paying-customers-to-stay/K5YOOOFL4FCANOSWG273ZRM63A/

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