Avant introduces cash back

Brendan Burgess

Brendan Burgess

Founder
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This is very disappointing.

Avant is giving 1% cash back on mortgages drawn down after 1 January 2025

I have long campaigned for cash back to be abolished as it's a means for banks to keep their rates for existing customers high.

It would be much better if they had lower rates rather than
 
Disappointing, sure....

However, there's a reason why their parent company is looking to grow it's Irish mortgage business. While Avant continue to be competitive, and remain *consumer friendly", what's the problem?

Also, I'm not convinced that getting rid of "cash back" will guarantee cheaper loan rates. How could it?

Lenders can do what the want, with regards to the SVRs. To the best of my knowledge, none document a true price promise, unlike with the old Tracker Mortgages, when the lending margin was printed in the agreement, so "set in strone".

If lenders scrap their cash back offers, initially offer what appears to be the cheapest SVR, but bump it up three months after a loan is drawdown, nothing can be done. The Borrower just has to suck it up, don't they?

I think I'd rather see cash back offers remain, as they help cover the costs of moving a Homeloan, if the borrower isn't getting the lowest lending rates.

A campaign to see a documented, and independently verified, price promise on the loan rate, seems a better idea, imho. Let the lenders go back to the old format of quoting their rate as a margin over ECB (granted, it would be a far bigger margin that those of yester-year, but it would be a contracted price promise).
 
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Hi Mr Earl

If they make it available to existing customers as well, off they go.

There should be no discrimination between new and existing customers.

Cash back allows lenders to keep their rates high while using cash back to attract new customers.

Let the lenders compete on rates and service , and not gimmicks.

Brendan
 
They are not really.
The costs and hassle are too high for most people.

Lenders exploit this by having higher rates for existing customers and by using cash back.

What is wrong with requiring lenders to compete on rates and service and not use financial tricks and gimmickry to fool customers into paying higher rates?

There is a huge information imbalance. Most consumers are simply not able to assess different mortgage offers and are fooled by cash back.
 
Brendan Burgess said:
Hi Mr Earl

If they make it available to existing customers as well, off they go.

There should be no discrimination between new and existing customers.

Cash back allows lenders to keep their rates high while using cash back to attract new customers.

Let the lenders compete on rates and service , and not gimmicks.

Brendan
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Good evening, Mr. Burgess.

I hope you're keeping well.

I do agree that lenders should compete on rate and service, but...

There's no guarantee that rates would be reduced, if these cash back deals were banned.

If anything, I think the cash back offers from various lenders at least help cover the costs for those who want to move (to a lender offering cash back). That option is open to everyone (excl. those on negative LTVs, or with hardcore arrears etc.).

Cash back deals are clearly only short term perks, but if they weren't there, the SVR wouldn't be lower, imho.

Without the old price promise of a margin over an independently verified cost of funds, the borrower continues to be at the mercy of the lender.
 
Doesn’t this apply to multiple walks of life?

e.g. utilities.

People who aren’t proactive and passively accept higher prices do end up subsidising more savvy customers. That’s just life.

There are also people for whom the cashback is really important. It helps pay for furniture, or bathrooms/kitchens.
 
Gordon Gekko said:
Doesn’t this apply to multiple walks of life?

e.g. utilities.
Click to expand...

It does, but it doesn't make it right. Companies should not exploit inertia. They should treat customers fairly and treat loyal customers fairly in particular.

But even if you don't agree with that, utilities are very different from mortgages.

It's easy to understand the cost of your phone or your electricity and so make a comparison. People do not understand how to compare mortgage deals.

And it's very easy and free to switch utilities. It is expensive and time consuming to switch mortgages.
 
It's a balancing act. It's consumer protection Vs personal responsibility. You dont want to encourage interia nor do you want lenders to take advantage of unsuspecting customers.

Mortgages are not rocket science but understanding an annuity formula is a step up from the basic 1+1.

Education is key. Be it a marketing campaign, actual school classes or a requirement for lenders to show the total cost of a mortgage etc. Give people the information and then let them make their own mistakes.

The danger is you over protect the consumer it's a race to the bottom. In such a situation there is little to no reward in expanding one's knowledge. If I think someone else will just do it for me then I'm the poorer for that outcome.
 
Corola said:
The expensive part is the solicitor's fees, which the cash-back normally covers. Doesn't it incentivise more people to switch to a better deal who otherwise wouldn't?
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Yes, but only if the borrower is ultimately moving up a cheaper loan rate, than their current rate
 
But some people might not move to a cheaper rate because of the upfront solicitor's fees, even if it's cheaper over the lifetime of the mortgage. Cash-back encourages more switchers overall.
 
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