Is Halifax's £750 mortgage cashback offer a good deal?

Banking

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.

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.

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.

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.

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.

Looking for a mortgage? Compare rates and fees at a glance

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In Scotland, Edinburgh is seen as a city with huge growth potential. In 2014, prices in Edinburgh were up 10% in a post referendum boom that shows little sign of slowing down.

Local agents are not expecting quite such stellar growth for the next 12 months, but they think price rises will be well above the average predicted for the whole country.

Rightmove named this as the area where it expects house prices to grow the most over the next five years. It says that over this period there will be a huge number of people moving out of London in order to afford to get onto the property ladder. They want a reasonable commute combined with plenty of attractions in the local area, and Southampton offers all this. With relatively affordable housing stock, it's a prime candidate for growth.

Luton was Rightmove's candidate for the second biggest house price rises over the next five years. It emphasised that this isn't a mater of opinion, it is the result of crunching the data.

Luton is another major beneficiary of the move out of London, and while it is arguably not as attractive a place to live as Southampton, it's only 23 minutes into central London - which rivals some of inner London's commuter times. With average prices of £179,368, it's clearly a far more affordable option, and the area has already started to show signs of a boom.

This was the third area suggested by Rightmove. As with Southampton, it is well positioned for London commuters, and also has huge local attractions.

A survey last year asked young professionals to name the place they would most like to live, and Brighton and Hove were the only areas that appeared on the list outside London.

One of the reasons it's not higher up the list is that houses are already on the pricey side, with an average cost of £338,956 - up 13% in the past year alone.

There may be few people who grow up with the dream of living in Swindon, but the electrification of the rail line to London will bring travel times down across the West Country, so Swindon becomes part of the outer commuter area.

Given that the average property costs £168, 968, it's easy to see why Swindon will be a popular option for commuters on a tight budget.

Bath is also going to benefit from electrification of the line, because the commute to London will fall to a manageable 70 minutes. The beauty of the city - along with a vibrant social and cultural life - makes it a clear choice for more long-distance commuters.

Of course, with an average asking price of £374,617, it's not a tremendously cheap place to buy, but the geography of the city restricts development, so these prices are expected to rise still further.

Property Frontiers says that the booming house prices in Oxford are set to get even higher. At the moment, travel to London takes 60 minutes, but this will reduce even further in 2016 when the line is electrified. Prices in the most desirable parts of the centre aren't much cheaper than London.

However, further out there are pockets of affordability, and when the Water Eaton station opens in 2015 it will open up areas to the north of the city too.

Manchester has seen enormous property price rises over the last couple of years, and Property Frontiers expects this to continue into 2015.

Other commentators are expecting the growth to slow over the next few years, especially given the gains made since 2012. However, demand for properties remains buoyant, and with the growth of the local economy, price rises seem inevitable.

Rising prices in London have pushed buyers further and further out of the centre, so estate agents are now claiming zone three as 'the new zone 2'.

Savills believes that the biggest gains over the next five years will be the less glamorous districts - putting the South and East in the frame. Gritty areas that could benefit include Ladywell, Streatham and Catford in the south, and Leytonstone, Forest Gate and Walthamstow in the east.

Cambridge could also perform well. It has already had house prices lifted by the growth of tech companies to the north of the city, and the arrival of pharmaceutical headquarters will help push prices up further.

In 2016 a new rail service from the city to the science park will keep prices rising, and beyond the opportunities presented by the local economy, Cambridge is also part of the 'outer commute' area of London, which Savills expects to shoot up in value over the next five years.

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