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When looking for the right mortgage deal, there are many things to consider. One thing that can really make a product stand out from the crowd is free cash – and our latest data shows that more providers are now offering cashback than last year, and with more cash to boot.
"As the mortgage market has undergone a period of uncertainty and rates have subsequently risen, lenders have been eyeing up their incentive packages," said Rachel Springall, finance expert at moneyfacts.co.uk. This means that anyone looking for a new mortgage would do well to be on the lookout not just for the lowest rates, but also the most lucrative incentives, with borrowers able to get, on average, "£83 more in cashback today than they could a year ago, with competition having intensified on certain deals in recent weeks."
| Mortgage deals |
(fixed and variable)
|Number of deals with cashback||939||1,249||1,315|
|Average cashback £||£366||£407||£449|
|Highest cashback £||£2,500||£1,000||£1,500|
Rachel reports: "In just the last fortnight, Barclays, Coventry BS, Leek United BS, Loughborough BS, Sainsbury's Bank, West Brom BS and Yorkshire BS have all launched or improved deals that include a cashback incentive. This will be great news for borrowers looking to cover the cost of moving, or to pay for the fees of instructing their own solicitor to handle the legalities."
However, you may not be able to so easily find a mortgage with cashback, as only 28% of the mortgage market offers such an incentive. There is clearly room for improvement, especially as most of these cashback deals are offered only on low loan-to-value (LTV) deals, with 64% aimed at those with deposits of between 5% and 20%. These first-time buyers would be able to get as much as £1,500, which can make a real difference when taking that first step onto the property ladder.
This shouldn't be the most important consideration when choosing a mortgage, though. A deal with a lower rate may very well work out to be much more cost-efficient over the long run compared to a cashback offer. "For example, at 95% LTV, Furness BS offers a £1,500 cashback incentive on its 4.50% five-year deal with no product fee, but it can be more expensive than others in terms of true cost," explains Rachel. "As an alternative, Yorkshire Bank offers a 3.79% five-year fee-free fixed deal with up to £500 cashback and a free valuation, making it £4,742.60 cheaper over the first five years [based on a £200,000 mortgage on a repayment-only basis over 25 years]."
So, whether you're looking for your first ever mortgage, moving home or simply remortgaging, always pay attention to the whole package. That said, some cashback deals can certainly be worth considering, as our Best Buy tables can attest. New cashback incentives appear to be coming in thick and fast at the moment, with Rachel stating: "As time marches on, it wouldn't be too surprising to see even more cashback deals surface as an enticement."
Did you know you can use our mortgage calculator to select only those deals that come with cashback?
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