When is a stooze... not a stooze? (CC-Free)

dfarry

I kinda agree with Galstonian here... offset mortgages can be used to lure people in and once they have the mortgage... the current account.... savings etc... they are in effect trapped.

Personally I am very happy with what I have.... it's a +0.75% base rate tracker with daily interest calculated....so I kinda win and loose by that... but with a large sum of capital to draw from if I wish.... I have a lot of flexibility to use my (or their money) however I wish.... Again for some the temptation to in effect borrow thousands of pounds at 5.5% may be great...but that is still cheaper than a personal loan....and if you then stooze too you can offset either the original mortgage debt or any additional borrowing.

I too am a higher rate tax payer...so the additional saving of tax is a bonus.

westernpromise

Martinslovechild wrote:

For example, if I receive 5.5% gross in the Egg Savings account, then this equates to 3.3% net. However, my mortgage rate is also 5.5% net, meaning that the gross rate is 9.16% !!!

Surely this overstates the benefit - the interest rate on offset mortgages is artificially high to begin with so you can't really infer a gross rate from it.

If you had a standard mortgage product on a loan of say £100k, you’d be paying about 4.5% on that, so interest outlay of £4,500. If you also had £100k of savings and wanted the after-tax returns to fund your mortgage interest, you'd need a gross return of 7.5% (7.5 less 40% = 4.5%). So that's the true deposit rate you're enjoying.

Still a very good return, of course, but available only to those whose mortgage is small enough to be stoozable in the first place :-(

Martinslovechild

Thanks for your comments guys.

You are correct in saying that the rate on an offset account is artificially high and I am fully aware that I could have gone elsewhere to get a lower 'real' rate.

However, I personally don't really look at the gross rate quoted. I'm more interested in 2 other things - firstly, the monthly saving in £'s, and secondly - the amount of time that I've been able to slice off my mortgage term.

Normally, people tend to take mortgages out for 25 years, but it occurred to me about 5 years ago that this was nonsense. After all, I could afford to pay some extra each month which would reduce the term. When I discovered stoozing, this was even more ideal - I could reduce the remaining term to an absolute minimum by continuing to stooze until the mortgage is fully repaid.

For me, the real headline figure is a saving of nearly £400 per month in mortgage & loan interest savings plus interest earned from stoozed savings. This equates to an £8000 payrise. Where else would I find a job which pays an hourly rate of over £1000 ?

dfarry

Oh yes.... its good when you look on your statemnent and see.... "Interest saved this month....£xxx - Interest saved this year to date ...£xxxx"