New Zealand's mortgage market is showing a different kind of competition, with banks offering cashback payments not only to attract new borrowers but also to keep existing customers from leaving. RNZ money correspondent Susan Edmunds reported that retention payments are now being used as lenders fight harder for good home-loan business, after a period in which cashback offers for new borrowers became more aggressive.

The shift is important because it changes the usual refinancing conversation. In a quieter market, borrowers often assume their current bank will not match the best offer available elsewhere. But RNZ reported that banks have been responding to competition by offering some customers incentives to stay. It is common for retention payments to be about 0.4 percent of the loan amount, while an ANZ campaign late in 2025 had offered 1.5 percent cashback to new home-loan borrowers, prompting other lenders to respond.

For a household with a large mortgage, even a small percentage can be meaningful. A 0.4 percent retention payment on a $600,000 loan would be $2400 before any conditions or clawback terms. A larger promotional offer can be worth much more. That money can help with moving costs, legal fees, insurance, rates, repairs or simply rebuilding savings after a tough refinancing period.

But cashback is not free money in the practical sense. Borrowers need to look at interest rates, break fees, legal costs, loan structure, clawback periods and the risk of being locked into a lender that is not the cheapest over time. A bigger upfront payment can be less valuable if the interest rate is higher for long enough. The useful comparison is the total cost over the period the borrower expects to stay, not just the cash paid at settlement.

The timing also connects to the property pipeline. Stats NZ reported that 39,087 new homes were consented in the year ended April 2026, up 16 percent from the year ended April 2025. More future housing supply, softer market conditions in some regions and cautious buyers all affect bank competition. Lenders want creditworthy borrowers, and home loans remain a core relationship product that can lead to insurance, credit cards, savings and business with the same bank.

For banks, retaining a good borrower can be cheaper than winning a new one. A customer with proven repayment history, stable income and existing accounts is valuable. If another lender is prepared to pay for that customer, the current bank has an incentive to respond before the loan leaves. That gives borrowers more leverage, especially when their income and equity position are strong.

The risk is that borrowers focus on cashback while neglecting structure. Many households still need advice on whether to split fixed terms, keep flexibility for extra repayments, reduce revolving-credit temptation or shorten the loan term. In a cost-of-living squeeze, the lowest immediate payment can be attractive, but the best mortgage decision may be the one that reduces long-term interest or preserves emergency options.

The practical takeaway is direct: anyone nearing refix or refinance should ask their own bank what retention offer is available, get written competing offers and compare the full cost. The banks are clearly willing to fight for some borrowers. The advantage sits with households prepared to make them compete on more than a headline cashback number.