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Not many people will be on the hunt for a new mortgage deal at the moment, so providers are doing whatever they can to make themselves appeal to those few customers still in the market. With competition pushing down interest rates as much as is possible, both residential and buy-to-let (BTL) mortgage providers seem to have turned towards cashback incentives to make their deals sound more appealing.
"Buying a new home or remortgaging your existing deal can be an expensive process," commented Darren Cook, finance expert at Moneyfacts.co.uk. "An offer that contains cashback may help to soften the immediate costs that this process incurs."
The same goes for any landlords looking to fix their rate before mortgage providers may decide to pull or increase their most competitive rates. With the market increasingly under pressure due to ongoing economic uncertainties, there's no telling when mortgage rates of all types will go up again.
"The current number of 1,459 residential products that are available with a cashback incentive is nearly two-and-a-half times greater than the number in November 2011, when it stood at 627," said Darren. "Additionally, these deals now make up 29% of the overall mortgage market, a marked increase from the 19% seen in 2011."
|Number of deals with a cashback incentive||627||948||1,249||1,315||1,459|
|Proportion of all products with a cashback incentive||19%||22%||26%||28%||29%|
As such, it's quite likely you'll find a Best Buy mortgage with cashback in the charts at the moment. Even first-time buyers may be able to benefit, as two-thirds of the 1,459 deals available today are for mortgages that require a deposit of 20% or less.
But are they worth it? While first-time buyers in particular will be happy to reduce their upfront costs, a high interest rate could see these upfront savings disappear in no time. For a true mortgage comparison, always look at the fees and rate attached as well as any incentives.
"An incentive of cashback to assist landlords in covering the costs of a buy-to-let mortgage is becoming a more prominent feature of the buy-to-let market," Darren commented. "Especially considering last year's upheaval in this sector, landlords will be looking for any way to cut costs and increase their margins. It seems that providers are obliging."
|Number of deals with a cashback incentive||93||213||291||339||444|
|Proportion of all products with a cashback incentive||22%||15%||16%||17%||19%|
As can be seen in the chart above, there's been a somewhat steady increase in the number of BTL deals that come with a cashback incentive. While this still encompasses less than 20% of the overall market, that in itself shows how much of an increase in the number of overall deals there has been since 22% of the BTL market had such an incentive in 2011 but there were only 93 to report.
With plenty to choose from – nearly double the number of products that had a cashback incentive two years ago – landlords might be spoilt for choice. Especially first-time landlords could benefit, as Darren found that "266 of these products are available at the higher loan-to-value tiers of 70%, 75% and 80%".
Despite all this good news, Darren warns that "interested landlords will need to do some digging to find the right product with the right incentive(s) [and] as always, borrowers will need to compare mortgages by taking all their features into account, rather than focusing solely on the incentive package, rate or fees."
Using the mortgage search tool, it's easy to filter out the deals that come with cashback and see which ones also come with a competitive rate. While it's not as easy to see the cashback deals on the buy-to-let mortgage search, this information will be under the Details button and the search still makes it easy to see the best overall deals for your situation. Remember that the mortgage with cashback may not be the best one for you!
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