The latest data from Moneyfacts has shown that the popularity of mortgage cashback offers continues to grow, with both the number of deals and average cashback amount both seeing increases.
According to Moneyfacts, the number of deals offering cashback has increased from 939 a year ago to 1,249 in November 2017 and 1,315 today with the average amount of cashback offered also steadily increasing, rising from £366 in May 2017 to £449 today.
The largest amount of cashback on offer has also risen from £1,000 six months ago to £1,500.
Rachel Springall, finance expert at Moneyfacts, said: “At a time when the mortgage market has undergone a period of uncertainty and with rates having subsequently risen, lenders have been eyeing up their incentive packages, not just their interest rates. On average, borrowers can get £83 more in cashback today than they could a year ago, and competition for this perk has intensified on certain deals in recent weeks.
In just the last fortnight, Barclays, Coventry BS, Leek United BS, Loughborough BS, Sainsbury’s Bank, West Brom BS and Yorkshire BS have all launched or improved deals that include a cashback incentive. This will be great news for borrowers looking to cover the cost of moving, or to pay for the fees of instructing their own solicitor to handle the legalities. Still, out of the entire mortgage market, only 28% of the deals offer a cashback incentive, so there is much more room for improvement.
Cashback on mortgages is more dominant on deals aimed at borrowers will smaller deposits or equity. Out of all the cashback mortgage deals on the market, 64% are available to borrowers who have a deposit of between 5% and 20%, with as much as £1,500 available. Indeed, first-time buyers may have very little cash to spare upfront, so they could be looking for an extra incentive to help them save some money.
However, while cashback is a handy perk, borrowers should be looking out for the most suitable mortgage deal for them, and not focus solely on the lowest rates or a standalone incentive. For example, at 95% loan-to-value, Furness BS offers a £1,500 cashback incentive on its 4.50% five-year deal with no product fee, but it can be more expensive than others in terms of true cost. As an alternative, Yorkshire Bank offers a 3.79% five-year fee-free fixed deal with up to £500 cashback and free valuation, making it £4,742.60 cheaper over the first five years**.
It remains to be the case that a good mortgage bundle shines for itself, and most of the best deals in the Moneyfacts Best Buys for first-time buyers offer a cashback incentive, such as the aforementioned Yorkshire Bank deal. These incentives are coming in thick and fast, too, as within the last week, Yorkshire Building Society launched a range for small-deposit borrowers that offers £1,000 cashback, as well as no product fee. As time marches on it wouldn’t be too surprising to see even more cashback deals surface as an enticement.”