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Borrowers enticed with mortgage incentives from lenders

Lenders have additional perks with residential mortgages to attract borrowers with thousands of incentive deals on offer.

Research from the latest Moneyfacts shows more lenders than ever are adding incentives to their residential mortgage package to attract first time buyers, home movers and remortgage buyers.

The number of offers including incentives such as cashback, a free valuation or free legal fees to entice home buyers have increased by 598 products between May 2017 and today.

More lenders are offering at least £1,000 cashback with their mortgage deals compared to the same period last year with hundreds including a fee valuation and/or free legal fees.

Apart from very low mortgage rates to reduce the cost of monthly repayments, first time buyers can save significantly on up-front costs when buying a new home with cashbacks, free valuations and legal fees.

Hundreds more incentive deals

The total number of incentives has increased 18.8% in the last two years from 6,134 in May 2017 offered by lenders to 7,289 in May 2019.

For older equity release buyers accessing money from their home, fixed rates of 4.0% can be secure for a lifetime mortgage including cashbacks to maintain your lifestyle or gift a child or grandchild the deposit on their first home.

The following table from Moneyfacts shows the number of cashback, free valuations or free legal fees offered by lenders over the last two years for both fixed and variable mortgage deals.
Mortgage deals May-17
Free valuation 2,909 2,926 3,336
Free legal fees 2,305 2,325 2,435
Cashback 920 1,239 1,518
There has been a significant increase in cashbacks offered by lenders up 22.5% in the last year and the number is higher by 65.0% since 2017.

Rachel Springall finance expert at Moneyfacts said, 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.

For remortgage buyers currently on their lenders standard variable rate, a new mortgage deal would help you to reduce interest costs and free application and valuation fees make the decision to switch easier.

There are 279 more cashback incentives available to home buyers compared to a year ago and more lenders are offering larger sums in excess of £1,000 such as Barclays Mortgage, Virgin Money or Nottingham Building Society.

Incentives are not as important to buy-to-let investors as lower mortgage rates allow them to reduce the cost of interest repayments to lenders and improve their yield.

Borrowers choose incentives carefully

Which incentive a borrower selects depends on your personal circumstances.

For home movers wanting to trade up to a more expensive home, they may want to use their own solicitor and appoint a surveyor for a comprehensive valuation if they feel the new home could be overvalued.

In this case they would avoid the free legal and basic valuation from the lender and select a larger cashback incentive.

For first time buyers stretching to purchase their first home with a big deposit may have little savings remaining and look to a generous incentive package to keep the additional costs down.

Rachel Springall said, of all the 1,518 cashback mortgage deals on the market, 60% or 904 are available to first time buyers who have a deposit of 20% or less with some offering as much as £1,500.

Although incentives can offer value initially, these mortgage deals have a higher interest rate and monthly repayment which could exceed these savings.

It is important to calculate the benefits of mortgages with incentives but higher interest rates and the lowest interest rate mortgages on the market.

What are your next steps?

Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or a buy-to-let investor.

For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to improve your quality of life or help your children start or expand a business.

Start with a free mortgage quote or call us and we can take your details. Learn more by using the equity release mortgage calculator, mortgage cost calculators, and property value tracker chart.

Mortgage Best Buys

These are examples of mortgage products we can approach with many more offering interest rates and flexibility to meet your needs.

1.18% Fixed Rate
60% Loan to Value
£1,034 App Fee
Until 31/10/2022
Reverts to 3.59%
1.16% Fixed Rate
60% Loan to Value
£1,525 App Fee
Until 01/11/2022
Reverts to 4.09%
1.17% Fixed Rate
60% Loan to Value
£1,025 App Fee
Until 31/09/2022
Reverts to 3.59%
1.19% Fixed Rate
60% Loan to Value
£999 App Fee
2-Years Time
Reverts to 3.59%

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    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.


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