First Direct Offset query

Caps_4444

I have a question.

I currently have a 5 year fixed rate mortgage with FD (5.29%), at the same time I asked for some extra borrowing which I have not used yet, but it's in an extra borrowing account and I can draw on it whenever I want. This is also at the same 5.29% rate.

So I have my mortgage (£75k) and the extra borrowing (£100k)

Now, with interest rates falling can I tell First Direct I don't need the extra borrowing, i.e pay it off and then re-apply but go for a tracker on the extra borrowing that I will want? I believe with an offset mortgage there is no redemption penalty if you pay part of the mortgage off, i.e. I give back the £100k and then re-apply for it?

Many thanks.

Locoblade

Its worth remembering that until you actually withdraw any of that £100k, you're not paying any interest on it anyway, so it doesn't matter what the rate is until you use it. Its also worth looking into early repayment charges on that extra borrowing, because I suspect as you've currently got a fixed 5 year deal, you would need to pay an ERC to pay it off completely, making a move to a tracker not worthwhile.

Even if you went onto FD's fee free tracker though (at +0.79%), you'd still be paying the same 5.29% at the moment. Im not sure as an existing customer you'd get that anyway though as its for new customers remortgaging to FD, which I think may leave you with their SVR offset (not a tracker) as your only option, which is currently at 5.50%, still higher than your current fix with no guarantee that it will track the BoE rate.

From what you've said I get the impression you maybe need much less than £100k now, in which case even if the BoE rate drops again, the interest rate on that smaller amount (say £20k) isn't going to make a massive difference to what you end up paying back, so another good reason to stick with what you've got.