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HSBC, Skipton Building Society, and Yorkshire Building Society are just some of the lenders seeking to entice borrowers with cashback of at least £1,000.
With the best fixed-rates still almost a whole percentage point higher than earlier in the year, could choosing a cashback mortgage help soften the blow of higher rates? Or are borrowers paying for cashback with higher rates and fees?
Here, we highlight what the best cashback deals offer, the other incentives lenders use to entice borrowers and explain what's happening to mortgage rates.
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Some lenders will offer borrowers a lump sum as an incentive to choose their mortgage product.
For first-time buyers and home movers, cashback can reach £2,000. While for those remortgaging, cashback typically tops out at £500, although some smaller lenders will offer rewards of around £1,000.
Which? analysis of Moneyfacts data, on 9 June, found that 35% of residential mortgages offer some form of cashback. This drops to 25% when removing green mortgage products.
Cashback is particularly common on green mortgages. These deals are typically available on properties with a high energy efficiency rating, often EPC A or B. Our analysis found that 96% of green mortgages offered cashback.
Cashback amounts are typically lower for remortgage customers, but they have the greatest choice of products offering the incentive. We found 1,649 remortgage deals with cashback, compared with 1,210 for first-time buyers and 1,171 for home movers.
Lenders will sometimes offer cashback as a way to entice current mortgage customers to remortgage with them. For example, Leeds Building Society currently offers £200 for customers who choose a new deal with it.
While Yorkshire Building Society offers £250 cashback for savings customers who take out a mortgage with them. To qualify, you can't have previously had a mortgage with Yorkshire Building Society.
To give you an idea of what cashback deals are available, we spotlight five deals with no upfront fees in the table.
Nationwide RECOMMENDED PROVIDER | 4.74% | £500 | 80% | Remortgage | 60% |
HSBC | 5.37% | £1,500 | 73% | FTB | 95% |
Yorkshire Building Society | 5.42% | £2,000 | 74% | FTB, home mover | 90% |
West Brom Building Society | 5.67% | £2,000 | n/a | FTB, home mover | 90% |
Skipton Building Society | 5.84% | £1,000 | 80% | FTB | 100% |
Source: Moneyfacts 16 June
Ultimately, cashback is nice to have, but it needs to be considered against the other elements of a mortgage deal.
Our analysis of Moneyfacts data from 9 June found that 44% of mortgages which offered cashback of at least £500 also charged upfront fees that were higher than the cashback offered. In other words, many borrowers would pay more in fees than they receive back in cashback.
It's also important to remember that a mortgage with a slightly higher rate but no fees can sometimes work out cheaper overall. For example, if you are taking out a loan of £250,000 over a 25-year term, the monthly difference in repayments between a rate of 5% and 5.2% is roughly £30.
This means a fee-free mortgage charging 5.2% could work out cheaper than a 5% deal with a £999 fee over a two-year fixed term. Over the two years, you would save around £280.
However, if both were five-year fixes, you would be much better off choosing the deal with the lower rate and upfront fee.
With so many factors to consider, you may want to consider speaking to a mortgage broker. They can look at your individual circumstances and work out which deal is best for you when taking all parts of a mortgage into consideration.
Cashback is usually paid after your mortgage completes, so you won't be able to use it towards costs such as your deposit or removal fees.
How soon you'll get the cash varies from lender to lender, so check their terms and conditions. Typically, cashback is paid upon completion.
For example, NatWest will send the money to your solicitor, to then be passed onto you, the day your mortgage is drawn down. While Nationwide states that cashback will be paid within one month of completion.
For standard residential mortgages, there are two other main perks that lenders sometimes add to a deal:
Find out more: the costs of buying a house
Borrowers searching for sub-4% mortgages still only have tracker mortgages to choose from. When we checked Moneyfacts data on 11 June, there were just 17 sub-4% tracker mortgages.
Out of the 100 mortgages with the lowest rates, none were fixed-rate mortgages. Every deal was either a tracker mortgage or a discount variable rate.
Fixed-rates have continued to drift down, but remain much more expensive than in February. The best fixed-rates are around 4.5%, depending on your loan-to-value.
The lowest rates for first-time buyers with a 10% deposit, looking for a five-year fixed-rate (the most popular product for first-time buyers), are currently around 4.75%.
To find the best mortgage deals today head to our guide. The tables update twice a day to ensure you always have up-to-date information.
