Banks offering cash to borrowers taking out house insurance with, and sometimes without, their home loans

Over the years banks have offered a range of non-interest rate incentives to help entice borrowers to take out a home loan.

Cash back offers are the most common example of this. However as well as cash, often in the thousands, TVs, tablets, smartphones, grocery vouchers, home makeovers and even tropical holidays have been offered by banks to try and entice borrowers onboard.

The tropical holiday offer came from Kiwibank in 2015 when the bank offered a holiday for two in Rarotonga with five nights accommodation for both new and existing borrowers taking out a new home loan of at least $150,000 with a minimum deposit of 20%. 

This month a new incentive has emerged with offers of cash to borrowers who take on house insurance with their home loan, and offers of cash to customers who just take out a home insurance policy. And in some cases the bank's insurance underwriter is paying.

Kiwibank is offering "$2,000 cash, plus $2,000 to go towards your new house insurance arranged by Kiwibank with your new Kiwibank home loan."

ANZ says; "Protect your biggest asset by taking out any new house insurance policy through ANZ before 11 August 2023 and get $500 cash back." Its offer is open to both new and existing home loan customers.

And Westpac says; "Take out a new Westpac Home [insurance] Cover policy between 1-31 May 2023 and get $200 cash back. Ts and Cs apply."

Richie McLay, Kiwibank's Senior Product Manager, says the bank's offer reflects "the environment first-home buyers are operating in right now."

"There are a few new costs that first home buyers face as new homeowners which include things like house insurance and rates. With the rising cost of living, it is one way we can give a helping hand to our customers embarking on this homeownership journey," says McLay.

Criteria to qualify for the offer includes minimum new lending of $400,000, minimum 20% equity, and the borrower having their income such as wages, salary or rental income direct credited into a Kiwibank account.

If the relationship with Kiwibank changes significantly, such as the borrower stops having their income direct credited into a Kiwibank account or refinances with another lender, Kiwibank can require the repayment of some or all of the cash.

Arguably a cash incentive for a new borrower is an upfront interest rate discount that can be clawed back if the customer moves to a new lender. Kiwibank provides an example of how much borrowers might have to repay if their relationship with the lender changes. This, it says, is calculated on a pro-rated basis based on how long it has been since the cash contribution was paid.

"Within the first year, we can claim back 100% of the cash contribution; second year, we can claim back 75% of the cash contribution; third year, we can claim back 50% of the cash contribution; or fourth year, we can claim back 25% of the cash contribution," Kiwibank says.

McLay says the insurance cash incentive is paid by Kiwibank rather than its insurance provider the Hollard Insurance Company or administrator Ando Insurance Group.

ANZ is offering $500 cash to home loan borrowers who take out any new house insurance policy through ANZ. The insurance is provided by Vero and both parties say who pays for the insurance cash offer is commercially sensitive. However, ANZ's website says; "Cash back payments will be made by, and are solely the responsibility of, Vero."

Westpac is offering $200 cash to customers who take out a new Westpac home cover policy arranged by Westpac and underwritten by insurer IAG. Westpac says IAG's paying, with payment to the insured customer’s Westpac transactional bank account, or if they don't have one, into any NZ bank account as advised by the insured customer.

Sarah Hearn, Westpac's General Manager for Product Sustainability and Marketing, says the $200 "goes a little way to easing the cost of home insurance amid a time of high inflation and increased living costs."

What about other banks?

A BNZ spokesman says the bank continues to offer "competitive cash backs," but no specific offers are currently being advertised. ASB hasn't responded to requests for comment.

An ASB spokeswoman says the bank doesn’t currently offer a cash incentive towards a home insurance policy. It does, however, have a $3,000 cash back offer for first home buyers who borrow at least $250,000. The loan must remain with ASB for at least three years. If it's repaid within that time, a pro-rate portion of the cash, based on the remaining months left, will be repaid to ASB.

CEO Mark Wilkshire says The Co-operative Bank has regularly offered straightforward cash contributions to customers taking out a mortgage, which can cover costs customers face such as refinance costs or legal fees. He acknowledges cash is also offered "to be competitive."

 "We have tended to keep things clear cut and have avoided bundling other customer needs such as insurance...As a bank focused on the needs of customers, rated as the highest bank satisfaction by Consumer NZ, we prefer to take customers through a needs assessment, as opposed to bundling products together," says Wilkshire.