TSB offers borrowers council tax cashback but how do its mortgage rates stack up?

29th August 2014


With the cost of living putting a strain on household budgets, TSB is offering to pay a year’s worth of council tax bills for new mortgage customers.

The challenger bank, which was hived off from Lloyds to become the seventh largest high-street bank, said its research found council tax is the largest monthly expenditure for 55% of people after they have paid their mortgage.

One in eight said electricity was their highest cost and one in 10 said their gas bill was their most expensive outgoing.

Paying the council tax is also the third most common worry for homeowners, with the unexpected costs like a boiler breakdown and unknown running costs of a new utility bill coming in first and second respectively.

To try and counter the financial burden and the worry, TSB is offering to pay a year’s worth of council tax for first-time buyers and home movers up to a maximum of £2,5000 on mortgages over 75% loan-to-value (LTV) and up to 95% LTV.

Once borrowers have moved into their new home they have to send the bank a copy of their initial council tax bill and TSB will pay the annual amount into their bank account.

Ian Ramsden, TSB mortgages director, said: ‘There are many costs associated with buying a new home, so by covering the cost of council tax in the first year, TSB can help to ease the financial burden for new homeowners.

‘We want to put money back into people’s pockets so they can spend it on other creature comforts for their new abode. Helping people take that first step and climb future rungs up the property ladder is a fundamental part of creating thriving local economies.’

How TSB mortgages match up

TSB may be offering up to £2,500 back on council tax but where do they rank on the best buy mortgage tables?

Those taking out a two-year 80% LTV loan with TSB can expect to pay 2.79% and a fee of £1,260 against a best buy rate of 2.34% and fee of £1,295 being offered by Norwich & Peterborough Building Society.

For those wanting to secure a mortgage for five years with TSB, they’ll need a 15% deposit; first-time buyers will pay 4.14% and a fee of £1,260 and second-time buyers will pay 4.19% and the same fee.

In contrast Chelsea Building Society is offering the best five year mortgage with a rate of 3.64% for those with a 15% deposit but the fee is £1,675.

If you need a 90% loan and want to fix for two years, the best deal TSB is offering is 4.49% for second time movers who will have to pay a fee of £1,260 and for first-time buyers the rate is 4.59% but there is no fee.

For the best two-year 90% deal on the market, borrowers should look to Chelsea Building Society again which has a rate of 3.44% and a fee of £1,675.

For those with just a 10% deposit who want to fix for five year, TSB is offering first-time buyers a rate of 4.79% and no fee while second-time movers will pay a rate of 4.89% and a fee of £1,260.

Away from TSB, Chelsea Building Society is the winner again with a five-year 90% mortgage coming in at 4.24% with a fee of £1,675.

Charlotte Nelson of comparison site Moneyfacts.co.uk who collated the deals, said TSB’s council tax offer would help with the upfront cost of buying and give borrowers ‘a bit of breathing space within the first year of buying their new home’.

‘The mortgage process can be costly, particularly when borrowers are unprepared financially for the little extra costs that can mount up and add thousands to the overall cost of the mortgage,’ she said.

‘Although cash rebates and incentives that pay bills can appear highly attractive the rate on the deal tends to be slightly higher than others on the market to compensate. Borrowers should try not to be lured in with attention-grabbing incentives, instead look at all aspects of the mortgage to ensure the best deal that suits them.’


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