The One Account 26 May 2006 at 9:40AM in Mortgage-free wannabe 7 replies 1.1K views

kazzadred

Hi,

I've been looking into the One account and wanted some advice.

I have a mortgage with First Active which is an absolutely fantastic no strings or tie-ins deal at the same rate as the BoE (currently 4.5%). I have current account and savings (only £1!)with A&L at 5% interest and a Smile savings account at 3.04%. I am planning to empty it when we go away in August though.

We have a mortgage of £65000 with 20 years left on it on a house worth £170000ish.

Would you advise us moving to One?

Gray0103

kazzadred wrote:

Hi,



I have a mortgage with First Active which is an absolutely fantastic no strings or tie-ins deal at the same rate as the BoE (currently 4.5%).

If you move to the ONE account, can I have your old mortgage deal ?

In answer to the question, I would say no

Joe_Bloggs

No! Why pay 5.7% when you are paying 4.5%. If you have significant savings (say 40% of mortgage) and these deposits attract higher rate tax on the interest then it might be worth while if you can continue to build upon these savings when held in offset accounts. The aim is then to bring the mortgage amount closer to the savings amount. As they get closer and closer it becomes less significant what the mortgage interest rate is.

Beware comparisons made between offset and conventional mortgages. They will often make comparisons with the SVR of a high street lender, often as much as 6.5%. They may also compare savings held in a rubbish saving account and a 0.1 % interest current account.

If you are not on an offset then look into getting the best savings rates. You really need a buffer of instant access savings to avoid the need to go into debt when unforseen events occur. My buffers are in a mini-cash isa and in mortgage overpayments which I can claim back. I don't pay tax on the former two but I do on the interest from £2K in an esaver.

I think you need a buffer of savings to even open a regular savings account. If you are forced to miss a payment then you lose the regular savings rate (many 8%+ gross). You need a £1000 to open some mini-cash ISAs (NS&I 5.05% net).

YBS do a 4.95% BofE life time offset tracker. Better value if you have less savings to cancel out mortgage interest. You may lose free legals costs if you go through a broker. The fees looks pricey but you only pay these once and not every couple of years. You would get £480 back in 1 year on saved interest between 5.7% on £65000.

J_B.

thecornflake

I looked into the One Account a little while ago. Because I have a fairly high income and only go overdrawn towards the end of the month, it worked out quite cheep for me but then I read somewhere that it is run very dodgily. This may or may not be true but I would advise anyone considering it to check this out first.
Basically if you don't pay a mortgage the courts will do quite a lot to prevent you losing your house by forcing the mortgage companiy to agree a payment plan or whatever. But the One Account is not classed as a mortgage so they can reposses a lot easier than a standard mortgage.
Also, if you're bad with budgeting it isn't good because overspending will just add to your mortgage and it's very difficult to see whaere you are becuase all you see is one account at say -£150,000.

ebba7

There's a less well-known option than the One Account which is their flexible mortgage option which we moved onto two years ago. We got a good introductory discount through Charcolonline and a fee-free remortgage (and the option to transfer onto the full One Account with no fee in the future). Basically, it's a lower interest rate than the One Account by at least 0.5% (depends on the value of your house and the amount owing); you can pay money in through Direct Debit from your current account, overpay, underpay, take up to 6 months payment holiday in a 12 month period, and get any savings transfered back into your current account in 3-5 days (free) or immediately (with a fee).

If you're in a situation where you have got some savings and want some flexibility I'd recommend it - although the deal you are on sounds competitive (I have thought several times of transferring onto more competitive deals) we've managed to put all our combined savings in there and each save a regular (small but builds up) monthly amount, and although you don't get online access you get statements every three months which I just use to divide out the spare capital (so we know how much belongs to each of us individually and how much is joint) and they keep track of where you are. In two years we've managed, through a combination of overpaying, savings and regular monthly saving, to get our mortgage down from £105,000 to £83,000, and although some of that's savings and might come out (and we have taken several thousand out for other purposes anyway) keeping savings in the mortgage helps us make a decent dent on the capital. And I've just arranged for us to transfer onto another special introductory rate...

Joe_Bloggs

@ebba7
This is the account some brokers hint about but I can't find any reference to it on the One account site. What interest rates were you on if you could not get another 'special introductory' rate ? How much did the new rate cost ?
How do you keep track of the net mortgage situation ? Do you have virtual accounts ? Why can't you manage your account online ? Why are only statements every three months ? It sounds like a confusing product to describe and to participate in. Thanks for pointing out your views on this mystery product.
J_B.

kazzadred

Thanks everyone for your advice - I'm going to stick with what I've got. Joe Bloggs, I would love to have a savings buffer - anyone want to start me off? I only work part time and hubby gets a dismal wage so savings are something we don't have the luxury of having except for holiday spending money, and that's only if I'm really strict with spending. My last 2 holidays have been on the credit card (0% of course!) and I'm still paying for them, plus a car loan. We don't drink, smoke, go out, buy expensive clothes or anything. So as you can see, unless we live on jam and bread there's no savings buffer prospects for a long, long time. Thanks though for your thoughts!

ebba7

Go to https://www.explainone.com - there is a 12 month discount at 4.64%. I found that going via an intermediary (charcol in my case) gave some more competitive "exclusive" rates so it would be worth looking around.

Why can't you manage it online and why statements only every 3 months? It's not a current account, just a flexible mortgage; I don't mind these to be on a lower rate than the standard one account because I have the flexibility I want, but it would depend on your circumstances as to whether you want to pay a higher rate simply to have online banking. Just my personal views.