Posted on 29th September 2012

The Return of Mortgage Freebies

There is little doubt that the mortgage market is still a tricky place to be in at the moment, but there are signs of small 'green shoots' out there; hinting at the possible return of confidence.
Overall, UK mortgage approvals during the first six months of 2012 have increased by 12% compared to the same period last year, according to figures from the Council of Mortgage Lenders. 
There has also been an increase in activity from lenders launching mortgage deals at higher loan-to-values (LTVs), providing some much-needed relief for first-time buyers. 
There were 36 new mortgage deals in the 85% LTV tiers and above in August 2012, a complete reversal from the drop of 26 products in July, according to research by Moneyfacts, a leading financial information company. This return to higher LTVs, however, should not spell the start of a return to the extreme highs available in pre-recession Britain. 125% mortgages have, given the fact that borrowers were plunged into automatic negative equity, quite rightly, been consigned to the annals of economic history.

One of the features of the boom years however is re-emerging: mortgage incentive schemes. Last month, for example, Tesco launched home loans that earn one Clubcard point for every £4 repayment. Santander has introduced a cash back scheme earlier this month for customers holding its 123 current account; this has the potential to earn one per cent of the value of their monthly payments.

Other mortgage lenders, including the Co-operative Bank and Nottingham Building Society, have pledged to cover legal and valuation fees, which can total around £1000, while others such as Halifax are offering help with moving costs.

However, experts are warning that all that glitters is not always gold, and that borrowers should instead focus on the mortgage rate, as initially attractive incentives can potentially cost more in the medium to long term.

According to Moneyfacts, many lenders are also limiting their most competitive deals to customers with an existing current or savings account. Their research has revealed that half of the top ten best-buy two-year fixed deals are available only to existing customers; this compares to one of the top ten a year ago.

Deals offering 'free' legal fees are also springing up, and they usually involve a solicitor designated by the lender. It can however be crucial to read the small print. As Andrew Montlake of Coreco, the independent financial and mortgage advisers, has stated: "Where free legals are offered, we have seen many instances where the speed of service leaves a lot to be desired. Where a quick purchase or remortgage is required, this can be a false economy."

Martin Williamson is Head of Residential Property at Latimer Hinks Solicitors in Darlington. Latimer Hinks has a team of around 40 people serving private and corporate clients. For further information: www.latimerhinks.co.uk or call 01325 341 500.