First Direct Offset and going overdrawn

dfarry

I currently have a Woolwich Offset mortgage and link current account. I really like the flexibility it gives me though I realise the interest rate may not be the best.

We are now buying a new house and with it a new mortgage, we have chosen First Directs flexible offset tracker because the rate is lower (during the first year or two), the setup fee's are lower and it is fully flexible without any redemption fee's....so I plan to remortgage again in about 3 years.

One thing isn't clear however and the advice from FD isn't either:-

At the moment my Woolwich current account lets me go over drawn as much as I want depending upon the total equity available in my home (agreed when the mortgage was started). This is handy each month as the staggered charging of bills means occassionally we drop into the red, or occassionally we make one big purchase (for arguments sake a car)...we can do it, the payment will be accepted and we can then make the other banking or loan arrangements after. Clearly this could be very tempting for many but we do manage our finances responsibly.

This makes little difference because each day the Woolwich add's up all we have in various accounts or savings pots and what we owe to calculate the daily interest charge.

In the case of First Direct they seem to do things differently and unfairly in my opinion. Though the offset product is termed as flexible I am still unable to go overdrawn it seems without agreeing a overdraft. If I don't do that I will incur a £30 fine as well as £25 per day for every £100 I think they said over the £500 preset overdraft amount.

OK it just takes a little bit more management I suppose but it seems wrong that they will lump on these charges when you other "linked" accounts may be in credit. Plus when you add up all of our accounts it is likely we will owe more than we have for many years so that kind of negates the whole idea of being overdrawn anyway.

Any thoughts please?....perhaps I have misunderstood them or been advised incorrectly.

dfarry

Anyone out there with the FD Flexi Offset?

Rik_S

Dan, I think I understand what you are saying, basically FD wont allow an overdraft without charging for it.

I`ve had a Fd offset for nearly 2 yrs. I have five accounts that are offset against the mortgage. Four of these have an overdraft facility that is fee free but I do have to pay interest...after all it is their money.

With regard to a major purchase like a car, there are number of options. For example having reduced the original mortgage by £5,000 you could then `borrow` amount again, alternatively take the money out of the offset pot.

Hope this is of some help.

dfarry

Thanks for the reply Rik...

Hmmm I think I should have read into this product a little more....

The Woolwich seems far more flexible. For example when I moved to them I wanted to borrow £51300 but they valued the place at about £110K
Therefore I had about £60K that I could borrow against whenever I wanted, no questions asked. There was no need to call them or agree an overdraft and certainly no £35 admin fee's

I don't like the idea of a semi flexible mortgage/account where they can pile on loads of extra charges but there isn't much I can do about it now....I'll probably look to remortgage anyway in about 18-36 months.

I don't have a problem with the interest, though this should be charged at the same rate as the mortgage. The should "sweep" all the money pots daily and add up what is owed against what you have and calculate the interest, they should not charge extra fee's on top of this and it sounds like this is what they will do.