Rise In Percentage Of Mortgages Offering Incentives | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 22/06/2020

Consumers looking to lock into a fixed rate mortgage will be pleased to see that, despite the fall in deals available, the total percentage of deals in the market that offer incentives has increased since March 2020.

Research carried out by Moneyfacts.co.uk found that since March, the number of deals with free/refunded legal fees has increased from 49% of the total number of mortgage products to 54% on the 19 June. Similarly, the number of deals with a free/refunded valuation has increased from 71% of the total number of mortgage deals in March to 78% on the 19 June, and the number of deals with cashback has increased from 31% to 33%.

Meanwhile, since March, the number of deals with no product fees has remained at 40% of the total number of mortgage products available. Saying this, the average product fee (excluding deals with no fee) has fallen from £1,040 to £1,029.

 

Fixed mortgage deal analysis March 2020 April 2020 May 2020 June 2020 19 June 2020
Average product fee (excluding deals with no fee) £1,040 £1,028 £1,024 £1,018 £1,029
Deals with no product fee 1,780 (40%) 1,100 (40%) 873 (40%) 959 (40%) 894 (40%)
Deals with free/refunded legal fees 2,157 (49%) 1,456 (53%) 1,218 (55%) 1,252 (52%) 1,220 (54%)
Deals with a free/refunded valuation 3,145 (71%) 1,873 (68%) 1,630 (74%) 1,863 (78%) 1,745 (78%)
Deals with cashback 1,377 (31%) 884 (32%) 737 (33%) 781 (33%) 744 (33%)

The % shown is the proportion of deals out of the fixed mortgage market. Source: Moneyfacts.co.uk. Data shown is at 1st working day of the month unless otherwise stated.

 

Although this is good news for consumers looking for a new fixed rate mortgage deal, they should still be cautious when looking at a deal’s incentives, as Eleanor Williams, finance expert at Moneyfacts.co.uk, explains: “While the increase in proportion of products that carry an incentive package is inherently positive and can alleviate some of the upfront cost associated with a new deal, borrowers do need to be aware that these incentives are likely to only cover the basics. Typically, free valuations tend to be basic and it is possible to instruct a surveyor to ensure a more comprehensive survey is completed. Free legal fees will generally cover just the standard conveyancing but, for anything more complicated, there would usually be further charges or the option to appoint your own solicitor.”

Average mortgage rates fall

Along with the percentage of deals offering incentives increasing since March, the average rates on fixed mortgage deals has fallen. Research by Moneyfacts.co.uk, found that since March, the average rate on deals with a fee has fallen by 0.59%, from 2.89% in March to 2.30% on 19 June. The average rate on deals with no fees has fallen by 0.52%, from 2.80% in March to 2.28%.

During this period, the average standard variable rate (SVR) has fallen by just 0.42%, from 4.90% in March to 4.48% on 19 June, which means that consumers who have been moved onto their lender’s SVR may have seen their average monthly repayments fall, but they could still get a lower rate by switching to a new deal. As Williams explained: “The potential savings for those looking at a new deal are clear, as those remaining on their SVR could be paying out as much as £182.58* more per month than those who have secured a new deal. Another consideration for those debating whether or not to look for a new mortgage deal is that the low initial rates we are currently seeing may potentially increase once lenders are able to return traditionally higher rated, higher loan-to-value products to their ranges.”

 

Fixed mortgage deal analysis March 2020 April 2020 May 2020 June 2020 19 June 2020
Average rate (deals with fee) 2.89% 2.93% 2.71% 2.43% 2.30%
Average rate (deals with no fee) 2.80% 2.80% 2.38% 2.32% 2.28%
Average standard variable rate (SVR) 4.90% 4.75% 4.55% 4.49% 4.48%

 

Williams added: “Deciding on the right mortgage deal comes down to more than just the initial rate available. Seeking independent financial advice would be wise to ensure the overall cost can be considered and to ensure the best option for individual circumstances is pursued.”

 

*Based on £150,000 mortgage balance over a 30-year term, approximate monthly payments calculated at a rate of 4.48% versus 2.28%.

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