In recent years the mortgage market has become an arena for fierce competition, with providers vying to have the lowest-priced deals on the market to attract new customers and secure their business for the long term.
However, there's only so low they can go, and as rates have been slashed, providers have begun to look beyond the headline rate in order to catch the eye of new borrowers. As a result, more and more providers are choosing not to compete on price alone but to also focus on the incentive packages accompanying their mortgages, which means borrowers can benefit from a huge range of mortgage freebies.
In fact, Moneyfacts' research shows that deals with an incentive package now represent three-quarters of the entire mortgage market (see table below), giving mortgagors plenty of choice when it comes to securing a truly beneficial deal.
*Incentives include cashback and concessions on legal fees and valuation fees
"The current level of competition in the mortgage market means that borrowers are not just being offered headline-grabbing rates, but also some of the most cost-effective mortgages they've perhaps ever seen," said Charlotte Nelson, finance expert at Moneyfacts. "Indeed, a staggering 75% of the mortgage market now offers borrowers some form of incentive, an increase of 13% in just one year alone.
"This is because providers are finding it increasingly difficult to stand out from the crowd to attract new customers thanks to the rate-cutting frenzy that has gripped the mortgage sector. The incentive package is therefore is great way to distinguish themselves from other lenders."
The range of incentives available often focuses on those that can help keep upfront costs to a minimum. Buying or a remortgaging a home can be expensive, particularly for those who have used the majority of their savings to put down a deposit, so incentives such as free legal fees, free valuation or even cashback can be really attractive.
"With so many more deals on the market to choose from, savvy borrowers will definitely be able to turn the situation to their advantage and minimise some of their upfront costs," added Charlotte. "Cashback is chiefly targeted towards first-time buyers who have even less cash to spare than most, so it's understandable that cash rebates of up to £1,500 can turn the heads of mortgage hunters.
"However, borrowers need to bear in mind that any cashback offered may not be paid until the deal is completed, so they will need to factor this delay into their financial planning. They should also remember to look at a mortgage product as a whole and not be swayed by incentives alone – the idea of getting something for nothing sounds great, but the whole package should be weighed up to ensure the best deal is obtained."
Compare mortgage deals to see if you can get the ideal combination of a low rate with added incentives
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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