what is a fixed rate offset Mortgage

manikm

i dont get what these are - i know what a fixed rate is, and i know what a tracker is - what the hells a fixed rate offset mortgage?

thanks!!!

jackomdj

Well an offset mortgage is one where they net off your mortgage with your other money...eg if your mortgage was £100k & you had £30k in savings, current account etc (they calc it daily) you would only pay interest on the £70k (ie £100-£30).
So what this is saying is it would be a fixed interest rate on the net balance, eg if one day your net balance was £70k you would be charged the given interest rate on that, if the next day it was £68k (ie got £2k come into your account) you would pay your interest on that.

hth
Nicky

dwsjarcmcd

An offset mortgage is where you use your savings to reduce the amount of interest you pay on your mortgage. The savings don't earn interest, instead it is nominally applied to reduce the interest you owe. The idea is that if you have a £100k loan and £20k savings and make the normal payments on a £100k loan, that combined with the interest you would have earned being applied to the mortgage, means you pay the mortgage off earlier.

They are helpful if you have a reasonable amount of savings. As no interest is actually paid they are effectively tax free.

A fixed rate offset is as above and has a fixed rate as per a normal mortgage.

David

Locoblade

Offset mortgages are worth considering even if you haven't got savings, but only if the rate is competitive against other regular mortgages. One Account etc seem to be quite high but others such as the First Direct offsets have pretty competitive rates. With zero offsetting, the mortgage would work/cost exactly the same amount as a regular mortgage at the same rate, but with most offset mortgages it also takes into consideration your current account balance, so by having say £3k in your current account for most of the month and paying bills right at the end, you'll knock £3k's worth of interest repayment each month, which for me would save about £10 a month, equivalent to a regular mortgage about 0.1% lower than the offset rate.