FeesMay 21 2018

Cashback mortgages on the rise

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Cashback mortgages on the rise

Cashback incentives on mortgage deals are increasingly being offered to homebuyers, according to the latest research.

Data released by Moneyfacts has found the number of deals with cash back has risen from 939 in May 2017 to 1,315 deals offering the incentive today (21 May).

The value of the incentive has also increased.

A year ago, the average cashback amount was £366, but it is now £448.

However while the highest amount of cashback last year was £2,500, this has now dropped to £1,500 today.

Rachel Springall, finance expert at Moneyfacts, 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.

“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 per cent loan-to-value, Furness Building Society offers a £1,500 cashback incentive on its 4.50 per cent 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 per cent 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.”

The popularity of cashback was evident in the last fortnight, when Barclays, Coventry BS, Leek United BS, Loughborough BS, Sainsbury’s Bank, West Brom BS and Yorkshire BS all launched or improved deals that include a cashback incentive.

Steven Sibley, director at Berkhamsted-based Highclere, said: “I have noticed that more clients are interested in deals offering a cashback. I believe the main reason for this highlights the worryingly low level of savings that many people have, and as mortgage rates are still incredibly low, people are more comfortable paying a slightly higher interest rate to get the cashback.”