Data from Moneyfacts shows the amount of cashback offered by lenders to first time buyers with small deposits is lower in the last two years.
According to research from Moneyfacts cashback amounts offered by lenders to first time buyers have reduced by £59 in two years where the mortgage has a high 90% to 95% loan to value (LTV).
A cashback is an incentive to make the lenders mortgage stand out and are offered to cash-strapped homebuyers who only have a modest deposit.
The number of mortgage deals with cashback have increased over the last two years from 145 to 242 although the lenders are not being as generous with their offers.
Fewer deals being offered
The number of cashback deals overall including first time buyers, home movers and remortgage buyers have decreased over the last two years from 1,022 two years ago to 918 today.
The following table from Moneyfacts shows how the number of cashback deals and the amount offered where the loan to value is 90% to 95%.
| Year | Number of deals |
Cashback amount |
|---|---|---|
| 2015 | 145 | 467 |
| 2016 | 254 | 416 |
| 2017 | 242 | 408 |
There has been a 66.8% increase in the number of these cashback deals offered although the amount offered has reduced by 12.7% over the last two years.
Charlotte Nelson, finance expert at Moneyfacts said at a time when providers are fighting for borrowers’ attention, the slump in cashback for those seeking higher loan to values is disappointing.
The decline in cashback offers could be due to providers reducing their costs at a time the average mortgage rates are at an all-time low.
Cashback may not be the best deal
First time buyers struggling on a budget may be attracted to the cashback offer to help reduce their costs can no longer depend on this with the fall in the number of deals and amounts on offer.
However, Charlotte Nelson explains you may be paying a higher mortgage rate for the privilege of cashback deal.
Lenders are tempting homeowners with these deals but the higher mortgage rate means the cost of monthly repayments are higher far more expensive than if they had opted for a standard deal.
First time buyers can still find cashback deals offering up to £1,000 but they must look at the whole cost of the mortgage over the offer period to see if the true cost in the long term.
Help can come from family members as the equity release buyer can access wealth using a lifetime mortgage and give a child or grandchild the deposit on their first home.
What are your next steps?
Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to consolidate debt, for home improvements or holidays.
Learn more by using the property value tracker chart, mortgage monthly costs calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.
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