Fall in cashback mortgages for first-time buyers
The average cashback for those with a modest deposit (90% and 95% loan-to-value) has fallen by £59 in just two years, while the number of products on the market offering cashback has also dropped, according to Moneyfacts.
The financial information provider noted that a year ago there were 254 cashback deals availalble at 90% and 95% loan to value, for those with small deposits. This has dropped to 242 today.
Less cash on offer
The average amount of cash paid on completion has also moved down over the same time period, from £416 to £408. Just two years ago it was £467 said Moneyfacts.
Charlotte Nelson, finance expert at the business, said: “At a time when providers are fighting for borrowers’ attention, the slump in cashback for those seeking higher loan-to-values (LTVs) is disappointing. Not only has the amount offered to borrowers been affected, but the number of cashback deals overall has also seen a decline, from 1,022 deals two years ago to 918 today, although the number at 90% and 95% LTV has in fact increased over that time.
“With average mortgage rates still falling to new lows each month, the decline of cashback on offer could be a sign that providers are stripping back their offerings to compensate for the low deals. Borrowers are also growing wise to the fact that these offers can be wolves in sheep’s clothing; they tempt the customer in but then provide a higher overall rate, making their monthly repayments far more expensive than if they had opted for a standard deal.
“Borrowers willing to hunt down deals will still be able to find cashback of up to £1,000 on offer. And those willing to switch current accounts can receive an extra cashback boost on top of this. However, borrowers will need to assess the whole mortgage to ensure it’s the most appropriate deal for them in the long run.”