Halifax announces £750 mortgage cashback offer
Some rival lenders offer lower mortgage rates, but does the cashback offer from Halifax make it the cheapest?
Halifax is looking to lure new mortgage customers with a £750 cashback offer.
It’s making the offer available to first-time buyers, home movers and remortgage customers who apply between now and January 2, 2017.
It’s not the first time the lender has used incentives to get customers through the door: last year it offered to refund 1% of your loan across a range of mortgage products.
While the new £750 offer is obviously nothing to be sniffed out, how does it stack up when you crunch the numbers?
How it works
Borrowers taking out a qualifying mortgage with Halifax will receive payment of £750 on completion of their mortgage.
The bank will also cover any basic legal fee and property assessment costs that may normally apply.
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Consider the total cost
It’s important to do the sums before opting for a cashback offer – it won’t necessarily be the best deal.
To compare mortgages you need to add the total cost of monthly repayments over the tied-in period (two years, for example), add on any fees and subtract any cashback.
Here are two practical examples to illustrate the importance of looking at total costs.
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Smaller loan with a short-term fixed mortgage
Let’s assume you’re a first-time buyer with a £25,000 deposit, looking to buy a £150,000 home, which you’ll repay over 25 years.
That means you’ll need to borrow £125,000.
A quick check on the Halifax site shows you can get a two-year fixed rate mortgage meeting these criteria with a rate of 1.84% and a £495 fee.
This gives you monthly repayment costs of £519.37, and a total cost over two years of just under £12,960 including fees. This falls to £12,210 once you factor in the cashback offer.
By shopping around, we were able to find a “cheaper” two-year fix at Yorkshire Building Society with a rate of just 1.44% – although the fee is higher at £995.
While the monthly payments are just £496, you get a total cost of £12,890 after two years.
In this example, the cashback offer makes Halifax the cheaper deal to go for.
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Larger loan with a long-term fixed mortgage
In the second example, let’s assume you have £50,000 and want to pay off a £300,000 home over 25 years.
So that’s £250,000 you’ll need to borrow.
Halifax offers a five-year fix meeting these criteria with a rate of 2.74% and a £495 fee.
On this deal, your monthly repayments will be £1,149.46 and you’ll pay a total of £69,462 when the five-year rate expires. Include cashback and this falls to £68,712.
By comparison, Yorkshire Building Society offers a five-year fix with a rate of 2.29% and a £995 fee.
This works out to monthly repayments of £1,095, and a bill after five years of £66,695.
So even when you factor in Halifax’s cashback promotion, you’re still more than £2,000 better off with Yorkshire.
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Consider your personal circumstances
So does the cashback offer make Halifax a good deal?
For some borrowers, yes. For others, the fact that you can find a lower rate elsewhere more than counters the initial incentive.
As a general rule of thumb, if you have a bigger mortgage, you should focus more on the headline rate and less on the fees and cashback – and vice versa for smaller mortgages.
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