Standard Life Whas going about the last rate cut and this one??

Kavanne

ricky_south wrote: »

They don't charge intrest on £140,000 but the full mortgaged amount. the money in the offset reduces the term not the monthly repayments (calculated yearly).
this is why the product is mis-sold. Sorry i did not make that clearer.

The money in my offset reduces my monthly payments so the term stays the same... they review it annually, they told me. (well it's not in my offset anymore as my rate is 1.25%, but you didn't want to know that )

sabretoothtigger

Your're with SL or which company?

Kavanne

sabretoothtigger wrote: »

Your're with SL or which company?

I am on a freestyle tracker with Standard Life 0.75% above BoEBR

leicsmark

i'm very confused with the argument on here.

If you owe £100,000 and put £20,000 in an offset account. What happens?

sabretoothtigger

Seems there is some variation in the terms of different offset mortgages and I know some trackers have a shelf rate or collar depending on how old the mortgage is

Generally I think an offset in your case leicsmark would mean you pay interest on the 80k owed so in effect you receive interest relief divided by your rate of tax, ie. 5% / 40% = 12.5% interest or with that lower rate it would 1.25% / 40% = 3.125% which could be beaten in a normal interest account probably.

No actual interest money on the deposit is paid out, you receive some reduction to the mortgage interest hence why no tax is payable

leicsmark

sabretoothtigger wrote: »

Seems there is some variation in the terms of different offset mortgages and I know some trackers have a shelf rate or collar depending on how old the mortgage is

Generally I think an offset in your case leicsmark would mean you pay interest on the 80k owed so in effect you receive interest relief divided by your rate of tax, ie. 5% / 40% = 12.5% interest or with that lower rate it would 1.25% / 40% = 3.125% which could be beaten in a normal interest account probably.

No actual interest money on the deposit is paid out, you receive some reduction to the mortgage interest hence why no tax is payable

Thank you for your reply. I am still a little confused. I will be coming off my fixed rate going onto SVR 5.34% in July. I won't be able to leave Standard Life due to LTV but am currently overpaying by 300 per month rising to 500 in September.

Rather than overpay I was hoping I could set up the offset facility of Standard Life's normal mortgage and pay the 500 directly into there.

I have spoken to them and they told me that it would basically mean I would not pay interest on an equivalent amount of the mortgage balance that I had in the offset account.

There seems to be an argument that this is not what happens, but I still don't understand what is actually different from what I have written above. Ricky above is getting very angry about it not working in this way and I don't follow. (I have a fairly good grasp of economics)

Could you also explain what you mean by "interest relief"? Where does the tax rate come into it? Thank you,

sabretoothtigger

In comparison to a normal interest account, you have to pay income tax on it so you divide in this case because its tax free