Mortgage lenders increasingly offering freebies to attract borrowers
With competition between mortgage lenders ever more intense, they’re looking at new ways to tempt borrowers…
The cost of borrowing for purchasing new houses and other homes has gone down in recent months thanks to strong competition between lenders. With most lenders now offering cheaper deals, new house buyers can fix their mortgage at record low rates for up to five years.
With low rates available, lenders have been pushed into finding new ways for getting new house buyers to come to them. The result is more offering ‘incentive packages’ with three out of every four mortgages for new houses and other properties now offering a ‘freebie’.
‘Freebies’ are now offered as part of almost 3,000 mortgage deals.
With interest rates at a record low, it’s these other incentives such as ‘freebies’ that have now become the focus of many lenders as a way of enticing customers to buy a mortgage product.
Financial analysts Moneyfacts revealed new research showing around 75% of mortgage deals now come with an incentive package. It gives mortgage borrowers much more choice when looking for a great deal.
As finance analyst at Moneyfacts, Charlotte Nelson says: “Borrowers are being offered some of the best value mortgage deals in addition to fantastic mortgage rates. This is because of fierce competition.
“An amazing three-quarters of mortgage deals on offer have an additional incentive now, a 13% increase on last year alone. It’s ever harder for mortgage providers to stand out from the competition and that’s led to the rate-cutting bonanza. Mortgage lenders find that offering incentive packages is a great way to set them apart from competitors.
According to research carried out by Moneysearch, currently there are 2,800 deals with incentives offered. That’s up from 2,462 last year and 1,578 in 2011.
Many of these incentives designed to keep costs as low as possible are aimed to help customers remortgaging as well as, for instance, new house first-time buyers. Examples of incentives offered include:
- Free valuation
- Legal fees paid for
Charlotte Nelson adds “Savvy borrowers for homes including new houses can certainly make this situation pay for them. With so many deals available, it can minimise immediate costs. Cashback is mainly aimed towards first-time buyers who could be on a tighter budget than most. It’s no surprise therefore that cashback sums of up to £1,500 are attracting the attention of mortgage customers.
“Nevertheless, it’s important to note that cashback sums might not be paid until after the mortgage deal for the new house is done. This delay will need to be taken into account in regards to borrowers budgets. It’s also important to view the mortgage product overall rather than just be convinced by the incentive alone. Something for nothing always sounds attractive, but the whole package should be considered to make sure you get the best deal.”