Which!!! mortgage incentive gimmick is worth having?
It seems that mortgages are currently en vogue and, providing you can meet the more stringent criteria for lending under the MMR, lenders are actually jostling to lend you money. What this means is that rates are getting more and more competitive, which is never a bad thing, but also that mortgage lenders are turning to the tried and tested ‘gimmick’ route to try and land your business. But are these gimmicks worth having, or are they just shiny baubles distracting you from the real prize of a better deal.
While cashback offers have been around for some time- such as Cumberland Building Society who currently repay homebuyers as much as 4% of their mortgage loan- but it goes without saying that these deals mean full payments less cashback should be compared with deals offering lower monthly payments. Now, some lenders are getting more creative with their bells and whistles. TSB are now offering (the equivalent of) a year’s council tax in cold hard cash, while Lloyds have just coughed up a shiny new iPad mini for new customers. However, our helpful friends over at Which!!! have had their sceptical head on, and are less impressed with these stellar offers.
Which!!! analysed mortgage offers currently available, and calculated the net amount payable in two scenarios, after taking cashback into account. Both scenarios covered two year fixed deals, with one ‘customer’ being a home mover with a 25% deposit on a £200,000 house, and the other a first-time buyer with a 15% deposit on a £170,000 house. In both scenarios, only one of the top deals (from Danske Bank and Yorkshire Building Society respectively) used cash rebates as part of their offer. The rest of the top deals were just at a better interest rate to start with.
For the home mover, the best deal was with the West Bromwich Building Society, which was £1,616 cheaper than the Lloyds iPad mini offer. So you could buy yourself multiple iPad minis and still be better off.
For the first-time buyer, however, little known Market Harborough did offer a deal £1,715 cheaper than the cheapest TSB deal qualifying for the Council Tax rebate, which saves £670 more than the average Council Tax bill. However, as the TSB rebate pays up to £2,500, if your Council Tax bill is higher than average, TSB might come through.
Either way, however, Which!!! reckon that “customers shouldn't be led by gimmicks” no matter how tempting they might be. Cash is king, so check the net effect on your pocket first.