I'm confused about mortgage product fee and cashback incentives

[mumarooni]

Hello

I am hoping there might be a friendly person who knows more than me about this and can explain in plain English.

Some mortgage products you pay a fee for - like 1k. But then those smae products can give you £500 cashback.

What is the point in this shenanigins? What does anyone (client or lender) have to gain from this, instead of just having half the produce fee (in this example, why not just charge £500 as the product fee?) I just don't get it.

I'm pretty confused about the cashback thing anyway. Surely they will have worked out that they will make more than that from you as a client anyway, so you aren't getting free money, you will be paying your own cashback into the rates they set and the profits they earn? Surely anyone in a position to be going for a mortgage has money in savings and doesn't need 500 cash in hand that will be paid for over the course of the mortgage anyway?

Any clarity greatly appreciated!

Thanks

I'm completely new to all this, but here's my take on it:

1k product fee makes you think twice about switching mortgages every 2 years; we were thinking about a 3 year instead of 5, but once you add on x2 lots of 1k, the mortgage rate would have to go down 2.5% for the second term to make the 2 + 3 year option cheaper.

Cashback is something quick and easy the bung on to make you more attractive than their competitors. A bit like supermarkets adding new BOGF ranges or extra clubcard points.

We were told the £500 cashback would be paid into our bank 28 days after completion or our first mortgage payment or some such thing.

The added 'delight' of 1k fees is that some will let (/make) you pay them in advance, whereas some will only let you add the fee to the mortgage. So, you pay 1k, but over the life of your mortgage that extra 1k may end up costing you 2k.

I just think of them like supermarkets, really. It's all smoke and mirrors and none of it really equates to spectacularly good value.

Thanks this does help it make a bit more sense. It's like playing chess against the lenders isn't it?! Working out what the actual costs and benefits of each plan is (how long to fix etc) seems like a minefield. We have a broker who seems ace so hopefully he wills steer us right.

It's a right royal pain in the arse to sit down and do the sums and I wish all this guff would just go away.

We also thought we had a good broker, we have been dealing with him and three others for three weeks and he always comes up with the best rates at the quickest speed.

However, Yesterday, he somehow managed to convince my OH to give him our debit card details because the mortgage provider would eventually need our 1k fee to proceed.

We specifically asked for a decision in principle and not a mortgage application because we are on the fence about buying this property: 'we have found some issues and need a few days to think about the purchase before we apply for the mortgage.'

Yesterday, the mortgage lender took 1k off our debit card and today the OH has had a text message about arranging a valuation.

Shame on you, L&C.