MortgagesNov 3 2015

Concerns raised about mortgage ‘freebies’

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Concerns raised about mortgage ‘freebies’

Data from Moneyfacts showed the number of mortgage products offering a range of freebies has increased by over a third in five years.

Charlotte Nelson, finance expert at, said the number of deals offering some form of incentive has increased by 616 in just two years.

Ms Nelson said: “Several providers now offer multiple options within one range of products, which means borrowers can tailor their mortgage choice to their benefit.

“However, more choice can mean it’s more difficult to compare options and gauge the potential benefits of an incentive package, particularly if it includes free valuation and free legal fees, which vary greatly according to the property price and may not negate the cost of a higher rate or fee.

“Freebies are always appealing but borrowers shouldn’t choose a mortgage based on its incentive package alone. Instead, mortgage applicants would be wise to look at the product in its entirety to ensure that the best deal is obtained.”

Brokers FTAdviser spoke to warn while the “freebie” is a tool increasingly used by lemders in the low interest rate environment to differentiate themselves from the wider market iy would be wrong to recommend a deal on incentives alone.

Brian Murphy, head of lending at Mortgage Advice Bureau, said he expects the use of incentive elements from lenders to continue as this is a method which lenders are increasingly using to differentiate themselves from the pack rather than just on price alone.

Mr Murphy said: “For some customers a free or refunded valuation fee, free legal’s (where remortgaging) or a cash-back can be attractive.

“As with any product where other features are included or bundled borrowers need to fully compare and contrast the costs over the benefit period of the product.”

Dale Jannels, managing director of Atom (All Types of Mortgages Ltd), said when changing providers, customers always want to keep costs to a minimum.

He said lenders freebies look great on some of the comparison websites, but a good broker will look at the actual cost of the mortgage over a period of time.

Mr Jannels said: “Low rates and freebies don’t necessarily mean it is the best deal for the customer.

“At the same time, in a market where speed and certainty of getting a mortgage becomes more of a priority, using a lenders ‘recommended’ solicitor who can be weeks behind because of the volume of business could be more detrimental to the bigger picture than paying a few hundred pounds at the outset.”