Cashback for first-time buyers is falling

The average cashback for homebuyers with a small deposit is falling, new research shows.

According to Moneyfacts.co.uk, that the average cashback for those with a modest deposit (90% and 95% loan-to-value) has fallen by £59 in just two years.

Cash rebates are seen as a great sweetener for cash-strapped first-time buyers, with the providers that offer this type of incentive really standing out from the crowd.

Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “At a time when providers are fighting for borrowers’ attention, the slump in cashback for those seeking higher loan-to-values (LTVs) is disappointing. Not only has the amount offered to borrowers been affected, but the number of cashback deals overall has also seen a decline, from 1,022 deals two years ago to 918 today, although the number at 90% and 95% LTV has in fact increased over that time.

“With average mortgage rates still falling to new lows each month, the decline of cashback on offer could be a sign that providers are stripping back their offerings to compensate for the low deals. Borrowers are also growing wise to the fact that these offers can be wolves in sheep’s clothing; they tempt the customer in but then provide a higher overall rate, making their monthly repayments far more expensive than if they had opted for a standard deal.

“While cashback offers borrowers with a limited budget, especially first-time buyers, a glimmer of hope that some upfront costs will be eased, the reliance on this can no longer be a sure bet, as not only the number of deals offering this has fallen but so too has the amount on offer.

“Borrowers willing to hunt down deals will still be able to find cashback of up to £1,000 on offer. And those willing to switch current accounts can receive an extra cashback boost on top of this. However, borrowers will need to assess the whole mortgage to ensure it’s the most appropriate deal for them in the long run.”