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Cashback mortgages soar to tackle problems with free legals

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  • 27/11/2017
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Cashback mortgages soar to tackle problems with free legals
The number of cashback mortgages available has risen by around 27% in the last six months while the average value grew by 11%, according to Moneyfacts.

The trend shows that lenders have been responding to calls from brokers to use cashback products to address concerns with the free legal sector.

In May there were 939 cashback deals on the market with an average value of £366 – almost identical figures to November 2016.

However, by the start of this month the total had lept to 1,249 with an average value of £407. This total slipped back slightly to 1,203 today.

The data shows that initiatives such as that of Leeds Building Society to bolster its cashback offering had been enacted more widely across the market.

Nationwide was another lender to act publicly by withdrawing its free legal options and increasing the cash back available.

The only down side to the change is in the maximum cash back amount available, which has slipped from £2,500 to £1,000.

 

Higher LTV incentive

Moneyfacts noted that cashback deals were also often considered an incentive for those with higher loan-to-values (LTV).

“That’s why first-time buyers will be disappointed to find that since the base rate announcement the number of deals with cashback available to them has shrunk by 30%, from 460 products available to those with a 5% or 10% deposit on 1 November to 321 today,” said Moneyfacts spokeswoman Charlotte Nelson.

“Following the recent base rate rise, many borrowers are starting to look at the cost of their mortgage more closely, so it’s great news that there’s been an increase in the number of deals on the market that offer a cash rebate,” she continued.

“Rates have started to go up in the past few months, so cashback incentives have stepped into the void somewhat, offering a simple way for providers to keep drawing in customers,” she added.

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