Westpac are offering a $2000 rebate for each property to new borrowers refinancing their mortgage in a bid for more market share.
The move comes as around $170 billion worth of interest-only loans are due to expire over the next two years.
Westpac is sure to face similar offers and incentives from their competition as lenders scramble to get their piece of the pie while demand for new loans continues to fall.
At the height of the property boom in 2017, interest-only loans accounted for around 40 per cent of the big four banks’ total loan book and that figure is expected to halve by next year.
Westpac says interest rates for interest-only loans are typically more than 50 basis points higher than those for principal-and-interest loans.
“We estimate the combination of contractual and customer-initiated switching will be a 2-to-3 basis point per year headwind for margins,” Westpac said in a statement.
Westpac have the highest ratio of interest-only loans of the big four banks, after all four spent big on marketing interest-only loans during the property boom.
Westpac and its subsidiaries – St George, Adelaide Bank, Bank of Melbourne – will offer the rebate to all properties refinanced over $250,000.
On top of this they are also offer a $1000 purchase rebate for every property bought with a loan over $250,000.