Competition in the banking sector for mortgage customers is continuing to intensify, with Westpac (ASX: WBC) now promoting a deal whereby home buyers will be offered $1,500 in cash to take out a mortgage with the bank.
As demand for home loans continues to increase due to interest rates sitting at a historical low of 2.5%, the banks are competing heavily against one another in order to gain market share and win over more customers.
Westpac's latest cash-back rebate offer, which currently has not been given a set time limit, is being offered to home buyers wanting to take out loans greater than $500,000.
The $1,500 being offered by Westpac is greater than similar incentives being offered by rivals — National Australia Bank (ASX: NAB) is offering customers $1,000 to switch to its services by the end of September, and Commonwealth Bank (ASX: CBA) is offering $700 to those who switch before September 27. St George Bank, which is owned by Westpac, is also offering $1,250 to customers switching from a rival bank by the end of October.
As quoted by The Australian Financial Review, Mark Hewitt, the general manager of mortgage broking firm AFG, stated that "The home loan market is about as competitive as I have ever seen it." Meanwhile, Mortgage Choice's spokeswoman Jessica Darnbrough put forward that there is "little separating the lenders on price" with each of the banks offering competitive variable rates.
Indeed, Westpac is already offering a discount of up to 0.9% to customers who take out mortgages valued at more than $250,000 as part of a spring home loans campaign in order to regain market share. Such competitive activity being undertaken by the banks has attracted the attention of the Australian Prudential Regulation Authority and the Reserve Bank of Australia, which have both warned the banks to not let their lending standards slip as they strive for market share.
Foolish takeaway
Despite the incentives being offered by Westpac, it still maintains a higher variable mortgage rate than each of its primary competitors. Due to this, the bank has lost market share over the last 12 months and it is a good sign that it is striving to regain its customer base.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.
