OFFSET dilema, what would you do?

Nice_guy

Hi George, thanks for the reply.

2.39+ over base is expensive when the rates rise, and we all know one day they will. I suppose the question is when will they rise.

I can see what you say about fixing for two years being pointless, however it does mean you do not have to worry about what happens for two years, plus if you think interest rates aren't going to go down any further from where they are now it's only 0.10 higher than the 'expensive' 2.39+ base.

You say they are two poor mortgage offers, I am really struggling to find anything close to these for an offset mortgage.

Again it sounds like you have a cracking deal with Britannia, well done :beer: but in this climate there is nothing of the sort available.

Haven't you offset your 40k savings against your mortgage? Therefore you shouldn't be getting any interest on your savings? Unless you are fully offset already?

Nice_guy

Nice_guy

getmore4less wrote: »

With level of saving and initial offset pot in a couple of years you will only have around £25k net(if you don't spend) so the rates rising will be less of an issue in terms of cost since on regular fixed deals the change fees will use up most of the savings unless they drop again.

If rates go up then the margins are likely to narrow so there may be a chance to change anyway.

I'm not sure I get why I will have 25k in a couple of years? I am happy to allocate the full 40k towards reducing my mortgage, the advantage I see by offsetting is that I can get it back if need be.

My mortgage is 113k, with 40k offset my outstanding will be 73k. My aim is to raise this 73k before I hit 30. If I manage to do this I will be fully offset meaning I have effectively paid my mortgage off without 'officially' doing so. I will have no monthly interest payments to make as I will be fully offset, the whole 113k can be drawn down at anytime during the term of the mortgage too, so if I do need to get access to the money I can. When you get fully offset it's like having a line of credit you can access at any time for the remaining term of the mortgage.

Plus if I get fully offset I won't have to worry about interest rates, they could be 20% and it won't effect me

Gorgeous_George

The savings are offset and the 'interest' earned is added to my mortgage payment to overpay the mortgage.

GM4L makes a good point. You should be mortgage free in three years so it isn't really too important which deal you take.

GG

Nice_guy

Thanks guys for the advice, it's really appreicated

getmore4less

Nice_guy wrote: »

I'm not sure I get why I will have 25k in a couple of years? I am happy to allocate the full 40k towards reducing my mortgage, the advantage I see by offsetting is that I can get it back if need be.

My mortgage is 113k, with 40k offset my outstanding will be 73k.

You said £40k now + £2kpm(£48k in 2y) so £113k-£88k = £25k net which you are paying interest on.
OK you may find something to spend the money on, but will you, we didn't so are 100% offet now.

I wonder if your £3k spends includes a mortgage payment? if it does then the net could be a lot less in 2 years and 100% offset in well under 3years.

Another thing to look at is Stoozing, ballance tranfers are not so good but the 0% spend cards can give you a fair amount of extra offset funds for little effort especialy with £3kpm going out.


With this level of saving you should be looking at ISAs now. This might make a lender that allows ISAs in an offset more attractive especialy if the 40k is allready ISA funds.

jiggy2

Nice_guy wrote: »

That sounds like a fantastic deal you got there Jiggy, shame there is nothing like that in the marketplace at the moment. When the BoE rate is as low as it currently is I think you would expect a higher % over base deals. I would think when you had your 0.79% deal the interest rates at the time were around 4-5% maybe.

I think you got a good point with the fixed rate, it is only 0.10 higher than than the base rate tracker. The fixed rate does have a redemption fee within the two year period tho. But can you grumble when you have a fixed rate for two years at 2.99, doesn,t sound bad does it.

Nice_guy

i applied for that rate in sept 08 (Lehman brothers collapsing prompted me to get the offer sorted as I thought it would badly affect the mortgage markets) and the mortgage didn't actually start till 2nd march 09 (as was tied in with A&L). the base rate when i applied was 5% and since the application has tumbled as you know.

the main thing was that i could (and still can) easily afford to pay higher interest if the rates had gone up...otherwise would have gone for fixed. At that time the fixed and offset rates were similar but the fee free and no redemption penalties for the BoE tracker made it easy

Nice_guy

getmore4less wrote: »

You said £40k now + £2kpm(£48k in 2y) so £113k-£88k = £25k net which you are paying interest on.
OK you may find something to spend the money on, but will you, we didn't so are 100% offet now.

I wonder if your £3k spends includes a mortgage payment? if it does then the net could be a lot less in 2 years and 100% offset in well under 3years.

Another thing to look at is Stoozing, ballance tranfers are not so good but the 0% spend cards can give you a fair amount of extra offset funds for little effort especialy with £3kpm going out.


With this level of saving you should be looking at ISAs now. This might make a lender that allows ISAs in an offset more attractive especialy if the 40k is allready ISA funds.

Thanks for the advice getmore4less!

The 3k spend does include a mortgage payment (currently £724 p/m), as well as allowing for nice holidays, clothes, cars etc. Our basic cost now to run our house (i.e. mortgage, bills, food, fuel etc) is no more than 1300 p.m, so we could if we wanted have quite a decent balance left over at the end of each month. I say we will save 2k p.m to be on the cautious side, but I do fully expect to save more than this.

I've read the thread on stoozing and we are fully prepared to undertake what the guide says. I rang M&S who are currently offering a 10 month interest free period on new purchases, the application has been filled out and ready to be processed on my say so. We have gone with two seperate cards instead of a joint one to have a higher credit limit. Having gone through our accounts virtually everything can be put onto the credit card. When we spend on the CC we will shift the money from our first direct current accounts into a seperate savings pot which will represent our CC expenditure. At the end of the 10 month period the money in this pot will be used to pay off our cards.

The 40k is not in ISA's, I know I should be shifting funds into ISA's to make the most of the yearly allowance but I'm placing more value on being mortgage free.

Bet it feels great to be 100% offset! well done to you!

dimbo61

For me the 2 year fix looks good at you have £40k to offset and can add £2k a month and little difference in the fees
But hey I did not see the BOE rate being 0.5% coming !
You could also fill a couple of regular savers with Barclays and hsbc paying 6/8% before tax.

getmore4less

£113k mortgage @ 2.98% fees £898

£40k offset

£2k pm savings

£724pm payment

http://www.whatsthecost.com/mortgage.aspx

100% offset in < 29 months.

Each £100pm extra saved will knock about a month off the date.

100% offset is nice but wish I had started the ISAs and other investment planning earlier, so I would say look at the biigger picture.

An offset is a great platform to do this.