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Number of mortgages offering incentives rises in May – Moneyfacts

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  • 21/05/2019
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Number of mortgages offering incentives rises in May – Moneyfacts
The number of deals offering incentives has seen a rise year-on-year, with those offering cashback alone increasing by 598 in May, data showed.

 

The number of deals with cashback rose to 1,518 this month from 1,239 year-on-year, according to Moneyfacts.

Mortgages with free or refunded valuation increased to 3,336 loans, up from 2,926 in May 2018, while those with free or refunded legal fees rose to 2,435 from 2,325 on the previous year.

The report found that more lenders are offering at least £1,000 cashback, such as Barclays, Cumberland BS, Nottingham BS, Principality BS, Post Office Money, Tesco Bank and Virgin Money.

 

Borrowers choosing cashback

Rachel Springall at Moneyfacts said that it is encouraging to see that lenders are not just looking to entice borrowers by offering competitive rates, but that they are also looking at the full mortgage package, leading to a rise in the number of products offering incentives.

She added: “Incentives are an important part of any deal to consider as they could mean cash-strapped borrowers save significantly on upfront costs.

Of all the cashback mortgage deals on the market, 60 per cent are available to first-time buyers with a deposit of 20 per cent or less, with as much as £1,500 cashback available, such as West Brom Building Society.

“It is worth keeping in mind not all of the products that include the most generous incentive packages will necessarily have lowest interest rates, so although these deals could offer upfront savings, in the long term, the higher monthly repayments could far exceed any initial savings.”

Brokers’ view

Shaun Church, director at Private Finance, said that this is a good move for lenders trying to reach more customers.

He added: “I am expecting to see more clients getting as many incentives as possible and more lenders doing cashback.”

Greg Cunnington, director of lender relationships and new homes at Alexander Hall, said that the rise in incentives has been apparent in both remortgage and purchase products.

He added: “For remortgage, the majority of lenders now offer a cashback option instead of using the lender’s free solicitors, which for a lot of client scenarios can be an attractive option, especially if the client is shortly reverting to their SVR or some other work is being done, such as a transfer of equity, that would incur costs.

“For purchase cases the more free valuation options available the better, and clients really like this option. We are increasingly seeing that clients like to get an independent survey carried out on the property as it enables more control over the report and also can be instructed once the mortgage offer has been issued, so the client is more confident the purchase will definitely proceed. This also has the benefit of enabling lenders to carry out more AVMs on purchase applications which means quicker processing time frames.

“In terms of cash back these are useful products for the right scenario, particularly for first-time buyers, but often the rate can be quite a bit higher and so on a total to pay basis once the loan amount goes above £300,000 or so, which for a London purchase would be a majority of applications, typically the lower rate option is the better recommendation in which case although a nice feature we find the uptake to be lower.”

However, Alex Smith, mortgage adviser at Capricorn Financial Consultancy, said that there is no point offering cashback if lenders still maintain high interest rates.

He added: “Cashback is not the magic product to get more business, the true cost of the product is more important than cashback.”

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