Residential 

Lenders entice with perks in competitive market

Lenders entice with perks in competitive market

Intensely competitive mortgages rates have led to an increase in the number of policies offering incentives as part of their mortgage package.

The latest findings from Moneyfacts showed there are thousands of deals in the residential mortgage market that offer either cashback, a free valuation or free legal fees alongside their standard product.

Since May 2017, the number of deals with a free or refunded valuation has increased by 14 per cent to 3,336 while the number of deals offering cashback has risen from 920 two years ago to 1,518 today.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: "It is encouraging to see that lenders are not just looking to entice borrowers by offering competitive rates, but that they are also looking at the full mortgage package, leading to a rise in the number of products offering incentives. 

"Incentives are an important part of any deal to consider as it could mean cash-strapped borrowers save significantly on upfront costs.

"One of the key groups of borrowers in the market that may pay particular attention to a deal’s incentives is first-time buyers, as they could have used all their disposable cash for a mortgage deposit or removal costs. 

"Therefore, a product that incorporates a generous package of incentives could be the better choice."

Carl Shave, director at Just Mortgages, said such incentives were used by lenders to spar for business in a market where they were struggling to compete on rates alone.

He said: "With lenders seemingly cutting a very fine margin when competing on rate alone and in turn struggling to feature strongly in best buy tables, cashback incentives are now being used to spar for business.

"The increase in customer retention awareness is also now playing its part as lenders still look to lend their quotas in the remortgage sector and search for different ways to entice new borrowers."

Shaun Church, director at Private Finance, agreed. He said: "Lenders are looking to steal the market share by using these incentives because rates are super competitive.

"If a lender can swipe some customers by offering some form of cashback or free service then that’s exactly what they will do."

Mr Church went on to say that although he thought it was positive for the consumer to be able to gain incentives, he would like to see more lenders offering cashback services rather than free legal advice as the quality of such legal services was often inadequate.

imogen.tew@ft.com

What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.