Can Offset Mortgages Save You Big Money?
April 2005
The First Direct bank reckon there's big money to be saved by mortgage holders who switch to an Offset Mortgage. The company in a recent press release states that mortgage holders could get a rate of up to 10.02% on their savings alongside keeping a slice of the £550 million that they're paying to the taxman.
With an offset mortgage homeowners set their savings and current account balances against their total mortgage and pay interest only on the difference between the two. The result means less interest payable and more money saved.
Research from First Direct states that there are 14 million non-offset mortgages in the UK who also have an average of £5,000 in savings alongside £1,000 in their current account. If householders were to combine these average savings and offset them against mortgage payments around £550 million could be saved each year. Incidentally this money goes to the taxman not the mortgage company.
Summary
Are First Direct right? Most probably but it's very unwise these days to rely too much on a financial company's research as 99/100 it's marketing masquerading as research. Offset mortgages are an advantage to certain people but as with anything consumers should do their homework and certainly fully investigate the negatives over the other styles of mortgages on offer in the market.
First Direct has two offset mortgage offers, the popular three-year fixed-rate offset at 5.49 per cent (5.9 per cent APR), and the variable offer combining a rate of 4.99 per cent for three months with a standard variable rate currently at 5.75 per cent.
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