Best offset mortgage around at the moment? Anyone taken one out recently?

ijrwe

I currently bank with NatWest (they got me with their good student account bonuses) and have been considering their quite good fixed-rate mortgages. I recently looked into offsetting, though, and realised that would work well for me:

Purchase: 90k
Funds: 65k
Of which deposit: 50k, roughly
Mortgage: 40k, roughly


So I could get a 40k mortgage and immediately offset about 15k of that, which is nice. I also can save a minimum of £250/month, likely closer to £500 in practice.

NatWest offer only one offset deal - no fixed term, and at their SVR of 4.00%. Fees of £500 plus valuation. So not great, really.

YBS has some decent fixed offsets with the same fee, including 2yrs @ 3.19%
3yrs @ 3.44%
5yrs @ 3.69%

I'd only save £225 in interest over 5.5ish years (time to 100% offset) with YBS vs. NatWest, BUT that's assuming the NatWest rates stay at 4%... which seems unlikely, perhaps. If it were to move to 5% then the difference in total interest approaches £1000.


But what a pain to move all my banking! Hmm.

Is it very silly to get onto an SVR mortgage of any kind?

ijrwe

After running some more numbers it really seems like everything comes out pretty much the same, almost to the penny.

I'm not sure if that makes my decision easier or harder!

dimbo61

I am a big fan of YBS and I don,t even work for them
We have had an offset mortgage with them for over 7 years.
As you point out yourself the deal from Natwest is 4% SVR while YBS are offering a 5 year fix at 3.69%
I would take out the mortgage over a normal term say 20/25 years and build up savings or overpay every month and you could be Mortgage free in 5 years with overpayments of £500 a month.
The quicker you pay down the debt or offset the debt the less interest you pay.
The reason for the normal term ? you are only committed to pay £236 a month ( over 20 years) while building up savings

ijrwe

dimbo61 wrote: »

I am a big fan of YBS and I don,t even work for them
We have had an offset mortgage with them for over 7 years.
As you point out yourself the deal from Natwest is 4% SVR while YBS are offering a 5 year fix at 3.69%
I would take out the mortgage over a normal term say 20/25 years and build up savings or overpay every month and you could be Mortgage free in 5 years with overpayments of £500 a month.
The quicker you pay down the debt or offset the debt the less interest you pay.
The reason for the normal term ? you are only committed to pay £236 a month ( over 20 years) while building up savings

Unfortunately the NatWest products have a 10% per year overpayment limit so there's not much that can be done other than choosing a shorter term from the get-go.

I normally hold quite a lot of money in my current account but I suppose if I was disciplined I could keep that very low and get everything over to a YBS savings/offset account.

Trouble is that I have an offer accepted the vendor has found, I need to settle on something pretty fast!!!

ijrwe

Total interest paid on a 40k loan, under certain savings conditions:

NW @ 4% variable: £3087.35
YBS @ 3.69% fixed: £2861.69

Minimal difference over 5.5 years (£3 per month!)

but NW rates will surely go up at some point...

jackomdj

ijrwe wrote: »

Unfortunately the NatWest products have a 10% per year overpayment limit so there's not much that can be done other than choosing a shorter term from the get-go!

But if you are looking at an offset mortgage you don't need to repay, just build up your offset pot so you are paying less interest. It still gives you the facility to draw back that money.

We are so lucky as we have an offset which is 0.75% above boe base rate for the life of the mortgage, unfortunately they don't do it like that any more!

ijrwe

jackomdj wrote: »

But if you are looking at an offset mortgage you don't need to repay, just build up your offset pot so you are paying less interest. It still gives you the facility to draw back that money.

I meant their fixed-rate ones, sorry.

We are so lucky as we have an offset which is 0.75% above boe base rate for the life of the mortgage, unfortunately they don't do it like that any more!

Gosh, that's not bad.

ijrwe

This YBS mortgage:

http://www.ybs.co.uk/mortgages/mortgage-finder.html#12665-product-details

Says:

Additional Features: £500 Cashback, paid on completion
Product fee: £495


So is that literally just ~£0 fees in practice? Why do they bother?

jackomdj

I think often people will take the cash and add the fees to the mortgage, so they then pay interest or the next 25 years on it... In the banks view every little counts!

ijrwe

Ah, makes sense. They'll probably spend the "cash" on something for the house and let the extra £500 sit on the mortgage, yea.

This deal looks better than NatWest, then, to be honest. £500 less in fees (that's 1.25% of my loan amount!) and 0.31% lower rates fixed for, essentially, the entire term.

kidmugsy

ijrwe wrote: »

After running some more numbers it really seems like everything comes out pretty much the same, almost to the penny.

I'm not sure if that makes my decision easier or harder!

It makes it less important.