Over the past couple of years mortgage rates have fallen, which has been great news for borrowers. But now that rates have reached rock bottom, providers have had to come up with more creative ways of being competitive, and this means that borrowers could end up walking away with a few freebies alongside their loan.
Adding freebies to a mortgage product has become an increasingly popular way for providers to attract borrowers: research by Moneyfacts has revealed that the number of mortgage products offering an incentive package has increased dramatically in the last five years, rising from 1,626 products in 2010 to 2,667 today. The chart below shows this in more detail.
Incentives can include free legal fees, gift cards and even cash rebates, all of which are likely to appeal to savvy borrowers who are looking to keep upfront costs down. First-time buyers are likely to be particularly interested in a comprehensive incentive package, as by saving money on the costs of arranging a mortgage, more money can be put towards the all-important deposit.
However, borrowers shouldn't base their borrowing decision solely on who offers the best incentive package, particularly as some of these deals carry higher rates or fees. "More choice can mean it's more difficult to compare options and gauge the potential benefits of an incentive package," cautioned Charlotte Nelson, finance expert at Moneyfacts. She advises borrowers to carefully weigh up the 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".
So, if you want to bag a great mortgage deal with potentially a freebie or two, it's time to start scouring the market! You can begin your search with our mortgage best buys, but make sure you judge the product in its entirety. This way, you can be sure you walk away with the most cost-effective deal.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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