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Don’t let the offset mortgage be ‘a forgotten friend’ – Laker

by: Sally Laker, managing director, Mortgage Intelligence
  • 23/05/2016
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Don’t let the offset mortgage be ‘a forgotten friend’ – Laker
There has been much comment about the lack of innovation in mortgages as vanilla has taken centre-stage, writes Sally Laker.

Amid a low interest rate environment the offset mortgage became a forgotten friend, except to the offset disciples – I myself am one.

Offsets give you flexibility to manage your money, and use your savings as part of your finances rather than leave them in a distant account attracting a tiny amount of interest that is also taxable. This factor alone means the interest earned is at a much higher rate than in a savings account. Although it would be fair to say that offset is not suitable for everyone, it is a product for those customers that want flexibility, access to their money, and control to enable them to plan for the future. Offset was ahead of its time when it first came out and needed a lot of explaining, and often the rates were more expensive because of the facility to drawdown and overpay.

In my opinion this is a product for today’s customer that manages their finances and wants easy access to move things around but all under one roof. The Coventry is strong in this area with a very flexible product, linked to one account with access to savings via online services, telephone banking, direct debit, or using a cash machine. You can overpay, reduce mortgage payments, port your current deal across and arrange further borrowing at the same rate. Of course all subject to criteria and terms and conditions.

The value of an offset mortgage is to use it as a financial hub, particularly those borrowers with bonus or commission payments, landlords, and regular savers as they can drawdown, repay, and overpay making sure that they only pay interest on the amount less the offset savings. It is simpler now, with online banking, clients understand more about using their bank accounts and accessing their money. This is the natural next step to making it work more in favour of the client rather than the banks that pay no interest on current accounts.

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