Louisa Sanghera

Borrowers have increasingly been exploiting a lending loophole and going cashback mortgage shopping over the past year, according to one of Australia’s most awarded mortgage brokers.

Zippy Financial Director and Principal Broker Louisa Sanghera said an increasing number of borrowers are refinancing every three to six months to qualify for cashback payments of thousands of dollars from lenders.

“These ‘cashback shoppers’ are exploiting a loophole that only requires them to stay with a particular lender for three or six months to keep the cash,” Ms Sanghera said.

“They are even congregating online and swapping hints and tips on how to secure new cashback deals every few months by using and abusing the services of mortgage brokers.

“They do not care about the fact that brokers spend considerable time and money on their refinance applications and will wind up with no commission whatsoever from the loan if the borrower does not stay for a minimum of a year.

“In fact, we make a loss, as it costs us $2,500 as a minimum to prepare each mortgage refinance application.”

NAB and CBA recently axed their cashback deals without providing an explanation as to why, according to media reports.

Ms Sanghera said cashback shoppers were sending some mortgage brokers to the wall because of the requirement to pay back loan commissions if the borrower refinances within the first year of the new loan.

“We are just being inundated with clawbacks because of these hordes of cashback shoppers,” she said.

“The issue has ramped up over the past year in particular and seems to be growing worse every day with online cashback groups feeding off each other.

“They seem to be very proud that they have found this loophole that they can exploit and just don’t care about how this is financially decimating many mortgage brokers.

“People need to remember we are small businesses making little profit. We are not big banks making millions. We are mums and dads trying to pay our own mortgages ourselves.”

Ms Sanghera said cashbacks have been unpopular with mortgage brokers since their inception a few years ago, because they often overshadowed the fact that the loan terms and conditions were sometimes not up to par.

“Unfortunately, for some borrowers, the offer of supposedly ‘free’ money via cashbacks has resulted in them sometimes signing up to loans that are not the best fit for purpose over the life of their property loan,” she said.

“Now we have a plague of cashback shoppers who are wasting our time, and costing us money, because all they care about is getting their hands on some extra cash – regardless of who they have to use to do it.”

The post Borrowers exploiting cashback loophole appeared first on AdviserVoice.