Free cash on mortgage deals intensifies

21 May 2018

Borrowers navigating the mortgage maze could well be looking for the best possible package to suit their circumstances, and one of the many perks that can stand out is cashback.

Mortgage deals with cashback may not be a new concept, but moneyfacts.co.uk can reveal that the popularity of such offers is growing: some of the newest deals to be launched onto the market recently include a cashback incentive*, with both the number of deals and average cashback amount on the rise.

Rachel Springall, Finance Expert at moneyfacts.co.uk, said:

“At a time when the mortgage market has undergone a period of uncertainty and with rates having subsequently risen, lenders have been eyeing up their incentive packages, not just their interest rates. On average, borrowers can get £83 more in cashback today than they could a year ago, and competition for this perk has intensified on certain deals in recent weeks.

“In just the last fortnight, Barclays, Coventry BS, Leek United BS, Loughborough BS, Sainsbury’s Bank, West Brom BS and Yorkshire BS have all launched or improved deals that include a cashback incentive. This will be great news for borrowers looking to cover the cost of moving, or to pay for the fees of instructing their own solicitor to handle the legalities. Still, out of the entire mortgage market, only 28% of the deals offer a cashback incentive, so there is much more room for improvement.

“Cashback on mortgages is more dominant on deals aimed at borrowers will smaller deposits or equity. Out of all the cashback mortgage deals on the market, 64% are available to borrowers who have a deposit of between 5% and 20%, with as much as £1,500 available. Indeed, first-time buyers may have very little cash to spare upfront, so they could be looking for an extra incentive to help them save some money.

“However, while cashback is a handy perk, borrowers should be looking out for the most suitable mortgage deal for them, and not focus solely on the lowest rates or a standalone incentive. For example, at 95% loan-to-value, Furness BS offers a £1,500 cashback incentive on its 4.50% five-year deal with no product fee, but it can be more expensive than others in terms of true cost. As an alternative, Yorkshire Bank offers a 3.79% five-year fee-free fixed deal with up to £500 cashback and free valuation, making it £4,742.60 cheaper over the first five years**.

“It remains to be the case that a good mortgage bundle shines for itself, and most of the best deals in the moneyfacts.co.uk Best Buys for first-time buyers offer a cashback incentive, such as the aforementioned Yorkshire Bank deal. These incentives are coming in thick and fast, too, as within the last week, Yorkshire Building Society launched a range for small-deposit borrowers that offers £1,000 cashback, as well as no product fee. As time marches on it wouldn’t be too surprising to see even more cashback deals surface as an enticement.”

*Mortgage deals launched in the last month include: Barclays, Coventry BS, Furness BS, Halifax, Leeds BS, Leek United BS, Loughborough BS, Newcastle BS, Sainsbury’s Bank, Santander, West Brom BS and Yorkshire Building Society.
**Based on a £200,000 mortgage on a repayment only basis over 25 years.