While the interest rate is important when choosing a mortgage, the actual cost of the deal will take into account a number of factors, including the product fee and incentives. So we looked at how product fees and incentives have changed over the past six months.
|Product fees and fixed price incentives|
|Average product fee (excluding offers with no fee)||€ 1,040||€ 1,028||€ 1,024||€ 1,018||€ 1,042||€ 1,059||€ 1,066|
|Offers with no product fee||1,780 (40%)||1,100 (40%)||873 (40%)||959 (40%)||896 (39%)||868 (41%)||806 (40%)|
|Offers with free / reimbursed legal fees||2,157 (49%)||1,456 (53%)||1,218 (55%)||1,252 (52%)||1,250 (55%)||1,226 (58%)||1,154 (57%)|
|Offers with a free / refunded review||3,145 (71%)||1,873 (68%)||1,630 (74%)||1,863 (78%)||1,755 (77%)||1,575 (74%)||1,439 (71%)|
|Deals with cashback||1,377 (31%)||884 (32%)||737 (33%)||781 (33%)||735 (32%)||646 (31%)||543 (27%)|
As the graph above shows, our research found that the average product fee for firm deals (no no-fee deals) rose from £ 1,040 in March to £ 1,066 on August 24th. The sharpest increase was seen between June and August 24, when it rose by £ 48 from a low of £ 1,018.
While the product fee has increased since March, the proportion of deals without a product fee has remained stable at 40%. This is despite the fact that the total number of toll-free deals fell from 1,780 in March to 806 on August 24, but that decrease is due to lenders withdrawing deals across the market for the past six months.
Borrowers looking for a deal with cashback offer will be disappointed that the percentage of deals with cashback as an incentive dropped from 31% in March to 27% on August 24, while the number of products with cashback from 1,377 to 543 has sunk during this time.
This wasn’t all bad news for borrowers, as the percentage of deals offering no or reimbursed legal fees increased from 49% in March to 57% on August 24th. Meanwhile, the number of deals with free or refunded reviews has remained stable at 71%. Williams added, “While it’s positive to see stability in mortgage incentives, it will likely only cover the essentials since free reviews are usually easy and free legal fees usually only cover the standard transfer. Choosing the right mortgage deal is about more than just the initial interest rate offered, but as interest rates rise and stamp duty ends in late March 2021, borrowers may want to act quickly as demand increases and application processing times may increase expand. It would be advisable to seek independent financial advice to ensure that the best possible deal is considered for a borrower’s circumstances based on the total lifetime cost of the mortgage package.