Offet Set Mortgage Dispute

al_t_73

I have an offset mortgage with Yorkshire Building Society.
Balance: £134000
APR: 5.94%
Savings: £22'000
The have three options for thie offset, i have chosen option 1, Reduce currebt payments, nat payment which is £801 a month.

I asked a very simple question, if i pay off £22'000 from the capital what will my monthly payments be, i expected to hear no difference as the amount of £22'000 is offset against the interest rate so i am just paying interest on £112000, but it isnt, it is £748 a month. This is £50 more a month, £11'920.50 extra over the term, there is 22.5 years left.

YBS say this is paying the extra capital, but they insist i will pay it all by the term, all being £134'000 so they dont take into account the £22'000 left at the end of the term meaning i will reach equilibrium at around year 19.

This is not in there literature, they advised i could reduce payments for the full term, and reach equilbrium at 25 years.

Basically they have no option available of reducing payments, but staying on the same term as i was advised.

Do i have cause for complaint, have i been misadvised?

Paying off my mortgage erly is no bad thing, but i dont want to be paying this extra money at this point.

TrickyDicky101

Your payments of £801 per month are presumably what was required to completely pay off (interest + capital) the mortgaged amount of £134k over 25 years. This won't have taken into account any savings you had at the time you took the mortgage out.

You are complaining about the feature of offsets that makes them so flexible: you are only being charged interest on your net balance of £112k but you still have use of your £22k of savings should you decide you want to spend it.

If you want to reduce your monthly payments then you need to discuss with the bank if they will allow you to make a payment off of your mortgage account and thus reduce the balance on the mortgage account.

getmore4less

Basically they have no option available of reducing payments, but staying on the same term as i was advised.

Do i have cause for complaint, have i been misadvised?

No, the offset funds are NOT part of the mortgage payments, interest or capital.

This is how I think it works.

When you reduce payment the payment is calculated to still pay off the debt as normal and leave the savings in place so at the end of the term your saving are still available to you.

When you reduce term they keep the payment the same and you pay the loan off quicker( the reduced interest due to offset pays capital), at the end your saving will still be available for you to use.

The advantage of both these methods is that you are not dependant on the saving to clear the mortgage.


If you don't want an offset product why not get a cheaper mortgage and just pay less each month.

Try some numbers on 23y term

£134k @ 5.95 23y about £892
£112k @ 5.95 23y about £745

depends on how they do the offset repayment calculation, if you asume a normal repayment schedule and just reduce the interest you get.
£134k @ 5.95 23y £22k offset, about £773.

YBS say this is paying the extra capital, but they insist i will pay it all by the term, all being £134'000 so they dont take into account the £22'000 left at the end of the term meaning i will reach equilibrium at around year 19.

so at that point you can just change the payment to come out of the offset pot and run it down over the full term.

Another option is to fund the higher payments from the offset pot if you want a lower payment from income but still retain some savings.