M&S Bank is launching mortgages and first-time buyers get £1,000 cashback
It's offering a tidy market-leading £1,000 cashback for those wanting to get on the property ladder for the first time
M&S Bank has launched its first ever mortgage range - with deals aimed at helping first-time buyers get their foot on the property ladder.
And to tempt would-be buyers, the bank is offering a £1,000 sweetner to those wanting to purchase their first home as it aims to bring "M&S-standard service" to the mortgage market.
The first-time buyer range includes two and five-year fixed rate and two-year tracker mortgages - buyers will be able to get a deal with as little as a 10 per cent deposit, so on property worth £200,000 they will need to only find £20,000.
The £1,000 cashback offer is currently the biggest on the market - double the amount of £500 you can get with Halifax and Nationwide and £700 more than you'll get back with Virgin Money.
To get the best deals, you'll have to pay a £995 product fee but it's also offering a "fee saver" option where you can avoid the charge in exchange for a higher rate.
The bank will also let up to four borrowers take out a mortgage together - as long as they all live in the property - which it says will help those who otherwise might not be able to afford a house by themselves.
Money expert Andrew Hagger said the first-time buyer range would be attractive to those wanting to get on the ladder.
He said: "The combination of a competitive rate, fee and a market leading £1,000 cashback will make M&S Bank a popular choice for those looking to buy their first home.
"It’s good to see some extra competition in the residential mortgage space from one of the UK’s biggest brand names – hopefully it will put pressure on other players to keep pricing low.
"As with similar forays into mortgages by supermarket banks, Tesco and Sainsbury’s, based on these initial products it looks as if M&S Bank will give established lenders something to think about."
According to this week's English Housing Survey, the average age of a first time buyer now stands at 33 - and they need an eye-watering average deposit of £50,000.
But despite the problems of getting on the property ladder Brits still dream of buying their own home, with 60 per cent of renters still intending to buy a house.
The number of mortgages approved in the UK dropped to its lowest level in nearly five years.
There were 36,115 mortgage approvals in December - a month after chancellor Philip Hammond announced the scrapping of stamp duty for first-time buyers on homes worth up to £300,000.
How to get help buying a house
THERE are several government schemes available to help you get on the housing ladder.
- Help to Buy loan: This scheme is for those who have a 5 per cent deposit, and is only available on new-build properties that are worth less than £600,000. The government lends you up to 20 per cent of the property value (interest-free for the first five years) which gives you access to cheaper mortgages. You will need to pay this back at the end of the mortgage or when you sell.
- Starter Homes: First-time buyers under the age of 40 can access this new scheme. You’ll get a 20 per cent discount on the market value of the property (new-build only) but you cannot sell or let the property for five years after you buy it.
- Shared ownership: This scheme is available to non-homeowners who earn £80,000 a year or less (£90,000 in London). People can buy a share of a home from a housing association and continue to rent the remainder. Buyers will need a ten per cent deposit as well as money to cover stamp duty and other fees. You’ll also need to find a mortgage lender that is willing to lend on shared ownership properties
Cashback has also become part of the mortgage market in recent years as providers try and entice customers.
Research from Moneyfacts found that the number of deals with cashback soared by 27 per cent in 2017 - though a lot of them aren't for first time buyers.
Sue Fox, chief executive of M&S Bank, said: "The launch of an M&S mortgage is a major milestone and I'm delighted customers will now be able to get the M&S standard service they have come to know and expect when they make the biggest and most important purchase they will ever make - their home."
How do the M&S first-time buyer mortgages compare?
Its five year fixed deal comes with a competitive rate of 2.59 per cent.
If you're buying a £200,000 property and you've got a £20,000 deposit - so you'll need 90 per cent loan to value mortgage worth £180,000 - your monthly payments over five years will be £720 a month, with the total payments over the term of the mortgage £43,195.
That's a total saving of more than £8,000 when you compare it to Lloyds Bank's five-year fix for first time buyers, which has a rate of 3.84 per cent, and has monthly payment of £843 -a more than £100 a month more than the M&S's deal.
If you want to fix for a shorter length of time, M&S's offer comes with a rate of 2.09 per cent.
Based on the same property price of £20,000 and a 10 per cent deposit of £20,000, you'll be paying back £673 a month back and £16,147 over the terms of the deal.
Again comparing that to Lloyds' two-year fix, you'll be paying £753 a month - a difference of £80 a month and £2,920 over the two years.
Both of these deals come with a fee of £995 but come with a free valuation and the £1,000 cashback.
It's worth remembering as well that even though M&S rates aren't the lowest on the market, it could still work out cheaper.
More on money
Yorkshire Bank currently has the lowest two-year fixed rate on the market at 1.82 per cent and £250 cashback, so you'll be paying back £650 a month - £23 less than if you were to go with M&S.
But it doesn't include a valuation, which could cost you £200, so the M&S deal works out cheaper over the course of the deal by £198.
M&S Bank was first launched in 2012 and for every mortgage it sells, it will donate £25 to homeless charity Shelter.
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