Big jump in lenders offering cashback deals

The number of lenders offering incentives – such as cashback or a refund of valuation  or legal fees – has risen significantly over the past two years, according to new data  from Moneyfacts

Their research shows that the number of residential mortgage deals offering cashback have almost doubled over this period: from 920 deals in May 2017 to 1,518 deals in May this year. 

There has been a similar, if slower, increase in the number of lenders offering free valuations and free legals. 

In total there were 3,336 deals offering free or refunded valuations in May 2019, up from 2,909 deals two years ago. 

There were 2,425 mortgage deals offering free or refunded legal fees, a rise from the 2,305 deals available in May 2017. 

This data shows that the number of mortgage deals with these perks have also risen year-on-year.

Moneyfacts notes that this includes the number of lenders offering cashback deals of  £1,000 plus. Lenders offering these more generous perks now include Barclays Mortgage, Cumberland Building Society, Nottingham Building Society, Principality Building Society, Post Office Money and Virgin Money.

Moneyfacts finance expert Rachel Springall says that lenders were increasingly looking at the full mortgage package, rather than solely competing on upfront rates. 

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

“As it stands, there are over 200 more cashback incentives compared to a year ago. Over the same period, the number of deals offering a free valuation has risen by more than 400 while there are now also over 100 more products that offer free legal fees.”

She says these deals are likely to particularly appeal to first-time buyers who may have little disposable cash once they had saved for a deposit. 

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. According to Moneyfacts, West Brom Building Society is offering one of the highest cashback rates to this group, with a £1,500 payment.

Springall adds that some borrowers prefer not to take the free valuation option, as this could be a more basic valuation survey, based on a drive-by or recent sales information.

“If they feel their property could be overvalued and therefore would prefer to instruct their own surveyor for a more comprehensive estimate,” she adds.

Moneyfacts also points out that the most keenly priced mortgage products on the market typically don’t have the most generous incentive packages. 

“Prospective borrowers in any doubt over which deal to choose would be wise to seek independent financial advice to ensure they find the right option to suit their needs, not just on the upfront cost, but for the full length of their mortgage.”

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