Choosing a cashback mortgage is tempting; putting some money back in the coffers after a property purchase can alleviate some of the financial pressures and stress.
With interest rates still low, lenders are increasingly using cashback mortgage offers to attract new borrowers. However, before you decide on this type of mortgage, take a good look at what’s on offer to make sure you fully understand what you are signing up for.
Last year, according to MoneyFacts, the availability of cashback mortgages increased by 27%. “Following the recent base rate rise, many borrowers are starting to look at the cost of their mortgage more closely, so it’s great news that there’s been an increase in the number of deals on the market that offer a cash rebate,” said Charlotte Nelson, finance expert at moneyfacts.co.uk.
Growing in popularity
Halifax is the latest lender jumping on the bandwagon, with a £500 cashback offer available until 18 March 2018, but there are more than 375 cashback mortgages available at the moment. Nationwide has a £1,500 offer on 2-year fixed rates for first-time buyers with an existing savings account, and most of the major lenders (Santander, RBS, Natwest and Virgin, for example) are offering cashback deals of £100 upwards with varying terms.
Most cashback mortgages come with stipulations. You may have to repay the cashback if you pay your mortgage off early, and it is likely that there will be tighter restrictions on mortgage overpayments, too. Some cashback mortgage rates will be slightly higher than their non-cashback counterparts, so comparing the interest rate with other available mortgage deals is important.
Whilst traditionally higher fees and interest rates have been associated with cashback mortgages, it is not always the case. For the savvy mortgage hunter, if you are aware of the pitfalls and can identify the best deals available then a cashback mortgage could give your bank balance a boost.
