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Education and a choice of offset mortgages would drive market – poll result

  • 31/10/2016
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More products and better education on offset mortgages would attract more customers to try out more diverse products, brokers say.

More than half of 127 brokers polled by Mortgage Solutions said a broader choice of product options would help them advise customers more on offset deals, while 18% named improved sales assistance from providers.

Only 4% of respondents have seen activity in this area spurred by the Bank of England base rate cut.

Chris Schutrups, managing director of The Mortgage Hut, said that lack of choice had led to advisers being “railroaded” into certain types of product, namely fixed and tracker deals.

“I think lenders have innovated in every area apart from the offset proposition. When offsets first came onto the market, mortgages were fairly rigid and interest rates were significantly higher, so being able to put your money in an offset was a godsend for customers,” he added.

“The market has changed a lot around offsets but offsets haven’t changed with it.”

Schutrups added that despite low savings rates, offsetting a mortgage could still be helpful for certain types of customers. However, he explained that broker education also needed to be revisited, with new entrants to the market not necessarily familiar with the product.

“I think the reality is that compared to old school advisers, people who have joined the industry in the last five years probably don’t understand how they work. Better education and better focus from the lenders would benefit customers.

“Advisers are often creatures of habit but I do think we could have more information on offsets and a much greater push from lenders because they are still profitable as products.”

According to Mortgage Solutions’ poll, 28% of advisers would recommend offset mortgages more to clients if they had access to a larger pool of high-net-worth customers.

But Paul Mahoney, managing director, Nova Financial, said self-employed customers, particularly those with large tax bills as well as regular homeowners that regularly save should also be taken into consideration.

“Offset mortgages are a great idea and people should use them more. Although the gap between savings and mortgage rates isn’t as large as it was before, depending on how much savings you have, offset can make a big difference.”

Mahoney cited the prevalence of offset mortgages in Australia, which are also often used among buy-to-let investors, adding that most borrowers in the country tend to bank with the same institution they borrow from.

“Perhaps the lenders that customers use in the UK, particularly specialist lenders, make it a little bit more difficult to take out an offset mortgage.”


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