Westpac will stop offering a $3,500 cashback offer to refinancers on June 30. It is also increasing some home loan rates. Westpac joins Commonwealth Bank and NAB in withdrawing cashbacks and making additional increases to some of its variable rate mortgage products. These big banks are prioritising margin over market share. They are also responding to pressure from brokers. The Mortgage and Finance Association of Australian and the Finance Broker Association of Australia have both been critical of the use of cashbacks by lenders to win business. Over the past week, Westpac has increased its basis variable rate by 10 bps, CBA increased its package loan rate by 10 bps and NAB increased its basic variable rate by 10 bps. These increases were in addition to rate changes announced after the Reserve Bank increased the cash rate by 25 bps on May 3. All the big banks have reported that their net interest margins have tightened in recent months and now they are moving to protect those margins. Brokers are opposed to cash backs because they believe they encourage churn without ultimately benefiting the borrower. The managing director of the FBAA, Peter White, told The Adviser: “We call on other banks to follow. We would rather see banks provide a commitment to not move interest rates outside of the movement of cost of funds. “We understand that in some cases, cashbacks bring a benefit to borrowers but we also know that it can result in borrowers paying more for the total cost of refinancing that they receive in a cashback. We need more transparency from banks, not gimmicks.” The chief executive of the MFAA, Anja Pannek, told the same publication: “The increasing use of these types of incentives at heightened levels is not good for the long-term sustainability of our industry. We have been pointing this out for some time. “Our view is that cashbacks make the overall costs of a home loan less transparent, introduce complexity and, unfortunately, have created downside financial risk for brokers.” With brokers now responsible for 70 per cent of mortgage distribution, those views carry some weight.