Mortgage freebies up by a third
A steady rise in mortgage freebies has been seen over the last five years as lenders look for other ways to add value in addition to low rates.
According to data from financial information provider Moneyfacts, falling mortgage rates have left providers with little room to manoeuvre when it comes to competing on price. As a result, lenders have come up with more innovative ways to attract customers, with a resulting increase in mortgage freebies.
These packages include goodies such as free legal fees, a free valuation, cashback on completion of the deal or even a giftcard. They are particularly appealing to first-time buyers as they potentially lessen the burden on their savings, giving them more cash for the all-important deposit.
Five years ago there were just 1,626 mortgage products that came with an incentive package. Now there are 2,667.
Of course, while an incentive package is clearly attractive to many borrowers you need to work out whether the freebies you are getting are genuinely valuable or merely gimmicks designed to sell an otherwise mediocre mortgage deal.
Charlotte Nelson, spokesperson for Moneyfacts, explained:
“The incentive package has become one of the most popular weapons in a provider’s arsenal when it comes to attracting borrowers, with the number of deals offering some form of incentive increasing by 616 in just two years.
“However, more choice can mean it’s more difficult to compare options and gauge the potential benefits of an incentive package, particularly if it includes free valuation and free legal fees, which vary greatly according to the property price and may not negate the cost of a higher rate or fee.
“Freebies are always appealing but borrowers shouldn’t choose a mortgage based on its incentive package alone. Instead, mortgage applicants would be wise to look at the product in its entirety to ensure that the best deal is obtained.”