Worry over ‘cashback mortgage lure’

Most would-be-homeowners and existing borrowers have a good knowledge of the costs and types of mortgages, but many are “lured” by cashback offers by banks that may not be the best choice, a survey by a mortgage broker reveals.

The survey, by Mortgages4Her, found that borrowers are much more “educated” about mortgage products than people were before the financial crash, with most people understanding the types of mortgages and the Central Bank’s income rules for qualifying for a home loan. The broker said it was “highly” encouraged by the findings, because the more borrowers knew, “the better your chances of getting the best value and the best product”.

However, it said it was concerned that a slice of its survey of 200 mortgage applicants and mortgage-holders would be influenced in their choice by cashback mortgages.

“A significant number of respondents, 35%, said they ‘fully and completely understood’ the various products on the mortgage market. A further 44% stated that they ‘kind of’ understood them, when they ‘put their mind to it’. Furthermore, 81% of those surveyed were confident to varying degrees, in their ability to understand fixed and variable mortgage rates, and what they might mean for them,” said general manager, Sinead Buckley.

“Worryingly, an additional 18% say they would be lured in by a cashback offer.

“We would advise people to take a very cautious approach to this. All may not be as it seems. I think people just need to remember that banks are not in the business of giving people free money without getting something in return. That’s not to say these deals are bad; you just need to make sure you do all the necessary calculations and computations, before diving in,” she said.

Other brokers and consumer advocates have said that cashback mortgages make it difficult for borrowers to compare mortgage rates across the market and that borrowers end up paying more.

Some brokers have said that cashback mortgages also effectively distort price competition in a market that already charges among the highest rates for variable and short, fixed-term home loans in Europe.

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