FTB - Offset mortgages advice

Doodlebug1

Hi all,

Looking for some advice - hubby and I currently looking for a the right mortgage for a house valued at 158500k and looking for a 110000k mortgage. We had an appointment at Natwest today to discuss our options and they suggested an Offset mortgage which I had no idea about until today, what do they base their rates on?- my question is is it better than a fixed or variable? There are alot of pros with the offset (repayments etc) or should I be looking at a fixed offset such as that provided by First Direct (2 yrs at 3.99%) compared to Natwest 3.75% (but not fixed)?

This is soo confusing for a FTB!!

Thanks for any help!!!

atlantis187

most of the first direct mortgages also allow u to offsett

phildo_2

I am on the Natwest offset at the moment, it is variable and the rate is set by Natwest, i.e. it doesn't automatically track BOE base rate.

Pre 2008 it followed base rate - when base rate changed you'd get a letter from NW informing you of the change in mortgage rate. However, once base rates started falling in 2008/9 the offset rate didn't fall at the same rate as NW increased the margin on the product. Also worth noting is that when the interest rate falls, NW leave your payment at the higher rate and you overpay the mortgage. (you can ring them if you want the lower payments)

I have done well with this product as over the last 4 years I have been saving like mad for a deposit on a bigger house, therefore I offset these savings which has meant:
1) I've paid less interest on my existing mortgage because of the offset savings
2) Not paid tax (higher rate) on interest on savings
3) I overpaid due to the lower interest rates and keeping the higher payments.

2 reasons that I'm not staying with the offset on the new house:
1) Max 75% LTV
2) Borrowing a larger amount so security of a fix is important to me.

dimbo61

I have also got an offset mortgage which has been fixed for the last 4 years with 1 to go with YBS.
Have managed with help from family to offset alot of the mortgage ( no limits to offsetting )
See YBS family and friends on mortgage section
Offset mortgage suit some people very well not sure on Natwest due to the fact that it does not track the BOE rate ( ie they set the rate)
I am much happier with a long term FIX

dimbo61

Have a look at First Direct some good rates at the mo

powerwin

Doodlebug1 wrote: »

Hi all,

Looking for some advice - hubby and I currently looking for a the right mortgage for a house valued at 158500k and looking for a 110000k mortgage. We had an appointment at Natwest today to discuss our options and they suggested an Offset mortgage which I had no idea about until today, what do they base their rates on?- my question is is it better than a fixed or variable? There are alot of pros with the offset (repayments etc) or should I be looking at a fixed offset such as that provided by First Direct (2 yrs at 3.99%) compared to Natwest 3.75% (but not fixed)?

This is soo confusing for a FTB!!

Thanks for any help!!!

I'm no expert, but here are my thoughts:

The most important aspect of a mortgage is how are you going to get it paid off. Only with a repayment mortgage will you be paying things off. If you get an interest only mortgage, you have to arrange your own investment vehicle to pay off the mortgage.

Then you have the decision on interest rates. Do you want fixed or variable. Essentially, this is a decision on how much security you want, and your opinion on the direction of interest rates long term. Note, they are currently low, so they're likely to go up. If you want stability, then go for fixed rates of longer term. If you want to benefit from low interest rates short term, then go variable, but you may get caught out by high interest rates in future, so you'll need to have a plan to deal with that.

The fact that a mortgage is offset just means that any savings you have with the institution get taken from your mortgage balance before mortgage interest is calculated. It's a very useful feature, but probably not the most important aspect of the mortgage that you need to get right.

I repeat, I am no expert.

Rgds

Doodlebug1

Thanks to everyone for the great advice and their thoughts on offset mortgages. Based on your opinions I am leaning more towards the First Direct mortgage, theres a pretty good deal with on at the mo which is the fee free base rate tracker offset mortgage - for us it's important that we have flexibility in paying off the mortgage. The catch always seems to be the expensive arrangement fees involved - FD have it on for £999!!