This is a payment made by the lender to the borrower upon completion of a
mortgage it is made as an inducement for the borrower to take a mortgage out
with that particular lender.
Cash back is generally at the expense of another type of deal for example a
discount. What happens is the lender is prepared to give away a certain amount
of money as an incentive to new borrowers, as such they will give you it in the
form that will best suit you, such as discount or cash back.
It should be noted that these types of deals do not come without early repayment
charge. This is to ensure that applicants don't use the lender to get some
cash back and then move the mortgage to another lender for a better rate before
the old one has a chance to recover their costs on the deal.
Payments made in the form of a cash back may be treated as gifts and subject to
capital gains tax.