Effect of Santander 123 account on mortgage rates

Slightly_OCD

I can't get my brain around how to work this out and thought you lovely people would be able to help!

If a Santander mortgage rate is say 3.24% but you have a 123 current account giving you 1% cashback what does that effectively do to the rate?

On a £140k mortgage the interest would be £4536 for the first year.

If the repayments were £1000 that would be £10 per month cashback so £120 per year.

Take this off the interest and £4416/£140000 is 3.15%

Is that right or is it too simplified?

Confused!

R_P_W

Does it matter? Why not just work out what the actual cost is of a mortgage per year/month?

Slightly_OCD

Thanks, that is a good idea. And I guess that way you can factor in the fees etc, I just wanted to get a comparison point as at the moment the Santander mortgages look quite expensive but I don't think they are once you take the cashback into account.

R_P_W

Personally I wouldn't let the cashback offer over influence my choice in a mortgage as in reality in quite small. Id focus on getting the right type of mortgage, appropriate fees and obviously the best overall interest rate for your own situation.