Homebuyers, we've got some good news – the number of mortgages that offer a cashback incentive has more than doubled in the last four years! This marked increase has been the direct result of falling mortgage rates across the board, meaning that providers have to find new ways to compete – and you can take advantage.
The figures, compiled by us here at Moneyfacts, show that there are currently 948 cashback mortgage deals on the market, over double the total of 469 recorded four years ago. At the same time, the average amount that can be received from this incentive has shot up, rising from £274 to £475 over the same four-year period, and the highest cashback offers can rise to as much as £1,500. That's not something to be overlooked!
Providers have turned to this kind of arrangement as another "weapon in their arsenal", said Charlotte Nelson, finance expert at Moneyfacts, and unsurprisingly, there's a key demographic being targeted. "This cashback war is highly targeted towards first-time buyers who have little cash to spare after paying their initial deposit, and it is an easy way for lenders to increase their lending to this more risky group," said Ms Nelson.
"As buying a home is often the most expensive purchase many will make, it is little wonder that borrowers are being enticed by offerings of cold hard cash of up to £1,500." That's certainly true – you just need to think of how much extra you need to spend when buying a home. Things like surveyors and conveyancing fees, legal costs and estate agent fees can all add up, so getting a bit of extra cash can make all the difference.
But, it's important to remember that, in most cases, cashback won't be paid upfront. "Many offers are typically paid after the mortgage deal is completed," added Ms Nelson, so you'll need to make sure you've got the available cash to cover any bills in the meantime, perhaps reserving the cashback for things like removal costs or new furniture to furnish your new home.
There's another thing you'll need to be aware of, too, and that's the fact that mortgages with cashback incentives often come with higher costs elsewhere. It's important to logically weigh up every aspect of the mortgage, from the rate and the fee to any incentive packages – spreadsheets are often helpful in this situation – because often, having lower monthly repayments for the length of the mortgage will work out as being better value than an initial perk.
Ms Nelson concludes: "The idea of free money may sound appealing, but borrowers must consider these deals with caution as they are often accompanied by a slightly higher rate or fee. Mortgage applicants would be wise look at the product in its entirety to ensure that the best deal is obtained." Use our mortgage calculator to get an overview of the deals available and an idea of how low your repayments could be.
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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