Free car, Argos vouchers - it's all on the house

Extravagant offers are becoming increasingly common in the mortgage market, as Britain's lenders are forced to fight for customers in an increasingly competitive environment.

Extravagant offers are becoming increasingly common in the mortgage market, as Britain's lenders are forced to fight for customers in an increasingly competitive environment.

The latest idea, a free car with every mortgage from West Bromwich Building Society, may well be the best offer yet, certainly for those taking out smaller loans where the value of the car (£8,000) represents a significant proportion of the mortgage's value. There is a minimum loan size of £90,000, but the downside is that you remain tied into the mortgage for five years at a variable rate of 5.99 per cent, well above some of the discount rates available of less than 4 per cent.

West Bromwich is by no means the first lender to come up with incentive packages to attract new business. Cash-back mortgages, for example, where you are paid a percentage of your loan back in cash, have been popular for several years.

Abbey is currently offering customers 1 per cent cash-back for every two years that they stay with the lender, if they subscribe to its "reward mortgage" package. The deal offers a rate that tracks the Bank of England base rate, always remaining 1.24 per cent above base. The cash can be used to pay off part of your mortgage, or on anything you like. There are no redemption penalties on this deal, but the downside here is once again that you must settle for a rate of 5.24 per cent, which will track any movements in the base rate.

Northern Rock offers a massive 10 per cent cash-back mortgage, pegged to a standard variable rate of 5.99 per cent, but including redemption penalties for the first 10 years of the loan. Barclays is meanwhile offering up to £1,000 cash-back on its tracker mortgage, currently at a rate of 4.6 per cent, with redemption penalties for the first two years.

Sainsbury's Bank offers 30,000 Nectar points for customers of its flexipay mortgage, which could be exchanged for £150 of Argos or Sainsbury's vouchers, return flights to most Europe destinations or for a trip on the Orient Express.