The rise of mortgage incentives

And I purposely put the word bargains into inverted commas because while prices may be deemed as cheap, it doesn’t necessarily mean that they represent a true bargain. I mean - how many items of clothing have you bought which were on sale that have never been worn? How many electrical items remain in the cupboard because they were on offer but aren’t really that useful in the cold light of day? How many ‘cheap’ impulse buys now sit under a layer of dust in the shed or the attic after being used once or never? I imagine we’re all guilty in one way or another. And with this discounting frenzy reaching fever pitch, it made me think of all the current deals, incentives and offers which have also emerging within the mortgage market.

For many retailers, this period has become a golden opportunity to rack up some extra sales before the Christmas shopping period starts in earnest. In terms of the mortgage market it’s also fair to say that in some cases lenders are utilising additional, but still responsible, incentives to help boost business levels to reach their end of year targets. Incentives such as fee free deals, cashback, free legals and free valuations (to name but a few) are hardly anything new in the financial services sector. In the wake of increased competition it’s inevitable that more lenders are looking to incentivise borrowers – similar to the way a variety of retail outlets will push particular products to attract consumers into their stores/websites and introduce a variety of loyalty schemes to keep them there. It’s important not to forget that lending is a business and for a business to be successful it needs to attract the right volumes. However, increased competition and incentives also adds a layer of complexity for borrowers.

In the great scheme of things, mortgage products are not that complicated. However they are not exactly something which is bought straight off the shelf. They do not all have the same terms, conditions and attributes and quite clearly not all products are suitable for all types of borrowers. This underlines the importance of the advice process, especially within a climate of where the greater the choice, the more confusing it can be for borrowers to realise the most cost effective or correct product to match their financial circumstances. And this is especially apparent for first-time buyers. It’s clear that all potential borrowers should conduct a certain level of research on mortgage types and availability. Having said that, it remains a huge ask for anyone to filter through all the available products and come up with the best one for them. With some hugely attractive headlines rates on offer it can be easy for borrowers to be enticed without fully appreciating the variety of costs surrounding them. Hence the growing importance of the intermediary market. But you already knew that.

As lenders we have a responsibility to provide flexibility and choice for a variety of borrowing needs, as well as maintaining the obvious risk balancing act. Many of the fee-free mortgages deals currently available to first-time buyers are helping to provide valuable savings opportunities. Although there are other innovative products which remain available in helping to raise a sufficient deposit.

Intergenerational lending is certainly nothing new, after all the Bank of Mum and Dad has been around for an age, but its importance within the FTB arena has never been so apparent. Products such as the Barclays Family Springboard Mortgage can provide a number of savings and whilst it continues to generate a growing amount of interest in the FTB and intermediary communities, its real value can sometimes go overlooked. Of course this type of lending can’t and won’t be for everyone; after all it is a serious undertaking which needs the right circumstances and financial considerations. However, this is a product arena which is constantly developing and evolving, meaning it is one which intermediaries need to keep in mind when dealing with a variety of FTBs.