Yorkshire, Barnsley and Chelsea Building Society have launched 10 mortgage deals that are not only fee-free, but come with cashback too. The deals are available to both first-time buyers and home movers and come with £1,000 cashback on completion.
But do these fee-free and cashback mortgage deals really work out cheaper than the lowest rates on offer?
What's the deal?
The three building societies, which are all part of the same group, are offering the deals in-branch, online or over the phone.
There are rates available for borrowers with loan-to-values (LTV) between 65% and 95%.
|Three year fixed-rates||Five year fixed-rates|
|65% LTV||2.19%||65% LTV||2.54%|
|75% LTV||2.44%||75% LTV||2.64%|
|80% LTV||2.99%||85% LTV||3.34%|
|90% LTV||3.59%||90% LTV||3.94%|
|95% LTV||4.69%||95% LTV||4.89%|
The building society trio said they decided to offer mortgages that are both fee-free and come with cashback after they commissioned research into the incentives and obstacles facing home buyers.
The study, conducted by YouGov among 2,000 people who don't prefer to rent, showed that paying up-front fees was among the biggest barriers faced among prospective homebuyers. Three-quarters of people said fees were an issue.
How do the rates compare?
As always, it's important to do the sums when comparing mortgage deals and take into account the interest rate, fees, and any cashback or freebies.
Let's compare Yorkshire's three-year fixed rate at 2.19% at 65% LTV. On a £200,000 repayment mortgage it would cost £866.33 a month or £31,187.88 over three years. The £1,000 cashback brings the total down to £30,187.88.
Meanwhile, Chelsea Building Society has a three-year fix at 1.59% at the same LTV with a £1,545 fee. On a £200,000 repayment mortgage it would cost £808.35 a month or £29,100.60 over three years. Adding on the fee brings the total cost to £30,645.60.
That means the Yorkshire deal works out £457.72 cheaper than Chelsea's best buy.
At 90% LTV Yorkshire's three-year fix also works out a winner. Although the rate of 3.59% is higher than some best buys, the cashback means it works out better value.
On a £200,000 mortgage, the Yorkshire deal would cost £1,010.92 a month or £36,393.12 over three years. Take off the £1,000 cashback and the total amount falls to £35,393.12.
The Co-operative Bank has a headline-grabbing three-year fix at 3.19% at 90% LTV. On a £200,000 mortgage it would cost £968.30 a month or £34,858.80 over three years. But a £1,499 fee brings the total cost to £36,357.80.
So the Yorkshire cashback deal works out £964.68 cheaper.
However it's a different story when you compare five-year fixed rates.
Yorkshire's best fee-free cashback mortgage comes with a rate of 2.54% (available up to 65% LTV). On a £200,000 loan this would mean monthly payments of £901.26 and a five-year total of £54,075.60. The £1,000 cashback brings the total cost down to £53,075.60.
Woolwich has a five-year fix at 2.19% with a £999 fee. On a £200,000 mortgage this would cost £866.33 a month or £51,979.80 over five years. Add on the £999 fee and the total cost comes to £52,978.80.
So the Woolwich mortgage is £96.80 cheaper than Yorkshire's fee-free cashback deal.
It's a similar story at 90% LTV – these new deals can be beaten.
Assuming a £200,000 mortgage, a customer would pay total of £61,943 over five years on Yorkshire's five-year rate of 3.94%.
But Leek Building Society's 90% LTV five-year fix at 3.59%, with a £995 fee. would cost a total of £61,650.20. That's £292.80 cheaper than Yorkshire's deal.
Doing the sums
The calculations would suggest that the longer the fixed rate lasts for, the more important the rate and the less important fees and cashback.
However, it's not as simple as that as the mortgage amount matters too. In general, the bigger the mortgage, the more important the rate and the less important other charges and freebies.
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