Borrowers are not aware of the high level of savings they need to make offset mortgages their best option, according to The MarketPlace. It said the majority of savers would be better off with a ‘traditional’ mortgage, with some flexible features, rather than an offset mortgage.
David Bitner, head of product operations at The MarketPlace, noted that on a typical £100,000 loan, over £30,000 in savings were needed to make offsets the best option. He said: “Most of the current deals available are at uncompetitive rates compared to traditional deals and if borrowers do their homework they will find that offsetting makes little sense for most of them. With only 3% of savers having over £30,000 in savings, it is clear that most borrowers should avoid uncompetitive offsets.”
However, James Duffell, senior communications manager at The One Account, pointed out that although the more you have to offset a mortgage the easier it is to make savings, that was only one element of offset mortgages.
He said: “There is a lot of talk of consumer debt, most of which is at far higher rates than a mortgage. Many customers have no separate car or personal loans because they are borrowing at a mortgage rate of interest, therefore saving money. Our research, with the London Business School, found eight out of 10 people could be better off with a current account mortgage. It is selective to think that offset mortgages make sense only if you have a lot of savings.”