RBS looking to drop ONE accounts soon

Antj29

I had a very interesting chat with a senior person at RBS today, and i was told that they are looking into dropping the ONE account, runnign costs and low uptake are proving a low return for RBS,

Perosnally i blame them for messing with the branding so mch over the last few years.

There is still a low uptake on offsets though on the maret due to them appearing too comlicated to normal mortgage holders.

Xbigman

As someone who is nothing more than a mortgage holder myself I must say I never considered an offset. The concept that someone would have a significant amount of money floating around which they didn't use to reduce their mortgage by paying off, or by putting down a bigger deposit, was, to me, a bit bizarre.
Now I accept that there might be those who have a few tens of thousands floating around for some reason or who might be stoozing there way through their mortgage (if you only have a thou or two offset is pointless anyway, right), but just what % of new mortgage holders are in that position?
Personally, If I had some money I'd want to invest it and keep it separate to my mortgage.

Or am I nuts?
Regards



X

AndyWallace

I would take an offset if I had enough savings.

On the basis that whilst the savings are in your linked account you retain full access to them and that the interest rate being offset is 'net' of tax and therefore a good 'safe' return on investment.

I would never use the One Account though because of their high interest rates.

Andy.

payless

Ant

silly having spent all the money rebranding - again & again

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silvercar

RBS has three offset mortgage brands: RBS, Natwest & the ONE account. They all operate with slightly different packages from the same call centres. I would guess they will rebrand them all as one product range.

I wouldn't have been happy to do my house move without an offset. All the rainy day money sits in the offset, reducing our mortgage. Enough there for 6 months salary etc. knowing its available helps me to sleep at night. also stick next years tax money in the offset savings, knowing I can get at it when needed.

bunking_off

I think that some may be missing the point on current account mortgages.

Some of the benefit is around offsetting savings, but it's quite right that large savings (or a good stooze pot!) are required to have much impact.

However, the bigger benefit is around changing one's paradigm in this area. I always find it curious that having a mortgage is considered an acceptable/normal way of life, but over on the debt free wannabee group having far smaller (unsecured) debts is a terrible thing. Ultimately, both are just large debt millstones, the only difference being the perception that mortgages are paying for assets (which with equity drawdown is increasingly a moot point). For me though, debt is a debt, full stop.

Rationally, with a normal mortgage one would use any excess funds from your wages at the end of the month to reduce the size of the loan, and not consider e.g. putting what's left in your current account into savings accounts that yield lower returns than the savings you'd make on the mortgage. Alternatively, if you take your leftover money and invest in the stock market, then defacto what you're doing is borrowing money (ie not repaying the mortgage as quickly as possible) to invest in a non-risk-free investment. I'm not saying this is a bad thing, but I am saying that most people don't think in these terms and tend to think of the money left at the end of the month as "spare".

There's exceptions to this rule, e.g. in isolated circumstances a combination of products can be found such that the mortgage rate is less than the net interest rates on savings, but they're few & far between otherwise it'd constitute a money making engine.

Now, some people, e.g. the folks on the mortgage free wannabee group, do act rationally and do everything they can to take all excess funds and reduce their debt millstone (aka "mortgage"). However, I think the majority of the populous pay the amount asked by the mortgage company, and get a warm feeling that they're servicing their debts. Of course, as we all know, it's in the mortgage company's interest to keep the loan at full term, because a longer term = more interest.

Now, with a current account mortgage, any excess funds you have automatically reduce your debt because it's all one big overdraft. You get a £10k bonus from work? It automatically gets knocked off the loan unless you decide to spend it. Your salary goes up by 5%? Unless your expenditure similarly grows - and it shouldn't because wage inflation is generally higher than retail inflation (ask any pensioner about that!), you'll have excess funds which will pay down your debt. This means the amount you pay off your debt is far, far higher than would be the case with a conventional mortgage.

Another element is because you can see you've got this f...ing ridiculously big overdraft which greets you whenever you get a balance of account at the cashpoint, it subtley affects your motivation of e.g. do you really need that 40-inch plasma? If you do decide you want it, a quick check on a easily devised spreadsheet will show you that it isn't costing £1000, because really by the time you allow for the fact that it'll put back the date when you have that big loan paid off so you'll have to pay more interest, the real cost is nearer £1200. Suddenly doesn't seem that attractive.

There's a price to be paid for this in that the interest rate charged for services like the One Account are higher than the norm. However, paying 1% more but getting your debt settled 5 years earlier than it otherwise would have been is a trade-off that may be worth taking.

I can't say whether I'd have a huge off-setting amount of savings. I guess, in absence of the One Account, I probably would have some savings, but have reduced the size of my mortgage. What I can say is that my original OA plan was for a 25 year loan, and on current progress it'll be paid off in 11. I may be paying a little over the odds interest wise, but I'm doing so for less than half the time that I would have done if I'd stuck with a conventional mortgage. I hope they don't withdraw it as I don't think I could go back to the chains of a conventional mortgage.