When looking for that all-important first mortgage, many borrowers will look to the incentives offered as well as the headline rate. Cash rebates are often seen as a great sweetener for cash-strapped first-time buyers and these deals will really stand out from the crowd as a result, yet unfortunately, it looks as though this kind of incentive is beginning to lose its shine.
Our latest research shows that the average cashback for those with only a modest deposit (who are therefore seeking mortgages at 90% and 95% loan-to-value) has fallen by £59 in just two years, so although the number of deals offering such an incentive has risen in that time, those providers aren't being quite as generous as they used to be. Take a look at the table below to see what we mean:
| Two Years Ago | A Year Ago | Today |
| Number of cashback deals at 90 & 95% LTV | 145 | 254 | 242 |
| Average cashback amount at 90 & 95% LTV | £467 | £416 | £408 |
| Source: Moneyfacts.co.uk | Compiled 30/01/17 |
It isn't just high loan-to-value (LTV) mortgages that have been impacted, either: the number of cashback deals overall has seen as notable decline in the last two years – despite the number at 90% and 95% LTV increasing – from 1,022 deals two years ago to 918 today.
"At a time when providers are fighting for borrowers' attention, the slump in cashback for those seeking higher loan-to-values (LTVs) is disappointing," said Charlotte Nelson, finance expert at Moneyfacts. "However, with average mortgage rates still falling to new lows each month, the decline of cashback on offer could be a sign that providers are stripping back their offerings to compensate for the low deals.
"While cashback offers borrowers with a limited budget a glimmer of hope that some upfront costs will be eased, the reliance on this can no longer be a sure bet, as not only the number of deals offering this has fallen but so too has the amount on offer."
However, don't be too disheartened: it's vital to bear in mind that, while cashback may sound like a good deal, you may be paying a higher rate for the privilege, which could actually cost you more in the long run. Charlotte explains: "Borrowers are growing wise to the fact that these offers can be wolves in sheep's clothing; they tempt the customer in but then provide a higher overall rate, making their monthly repayments far more expensive than if they had opted for a standard deal.
"Borrowers willing to hunt down deals will still be able to find cashback of up to £1,000 on offer, but they'll need to assess the whole mortgage to ensure it's the most appropriate deal for them in the long run."
What next?
Compare the top first-time buyer mortgages, but make sure you're getting a good rate as well as a decent incentive
