Banks are cracking down on customers who accept cash incentives when they take out a home loan - then switch their business to another bank. Our founder Glen McLeod says it's fair for banks to ask for their sweeteners back if customers left.

Most banks offer sweeteners of a few thousand dollars to people who take out new loans, as a way to encourage new business.

But customers are being warned it is not without strings.

Glen says it was common for banks to ask for the incentives to be repaid, if the customer sold a property and repaid the loan, or took their business to another bank.

"And rightly so," he says. "People were using the cashback – I think the biggest one we've had was $15,000 or $20,000 – to cover break costs. The bank has bought the business and if they leave in five weeks or six months, that's pretty harsh."

He says some banks would claw back a cashback up to three years after the deal was done, although sometimes the percentage of the sweetener that was requested to be repaid would drop over time.

His warning was echoed by the Banking Ombudsman, which recommended customers make sure they knew the full costs involved in switching to a new bank. It has dealt with five clawback cases this year.

In one, the customer was offered $3000 as an incentive to accept a home loan, with the condition he stayed with the bank for two years. Five weeks later, he decided to change bank and was surprised he had to repay the $3000 plus an administration fee. The Ombudsman backed the bank.

Another customer faced a similar issue. He accepted $4000 as an incentive on a $550,000 home loan with the same two-year term. Six months later, he sold his property and repaid his loan. The bank requested the $4000 back, plus a $7000 early repayment charge.

"If you are considering moving banks, take some time and do your homework," said Banking Ombudsman Nicola Sladden. "If you have accepted a cash incentive, the bank will often ask you to pay that back if you decide to move banks."

She said banks might lose money when a fixed-rate loan was repaid early and they were entitled to recover that loss. She said the details of what would be required would be set out in the terms and conditions.

Glen also says banks were also enforcing break fees more rigorously. He said more customers were looking to break terms and fix new, longer loans to avoid future rate rises. In one case, a customer had been quoted $400 to break a loan term that was due to run out in three weeks.