Offset Mortgages -- the Numbers

hpuse

Hi
Assuming 3.95% is the current rate of your offset mortgage - that is a bit high in my view.
As far as I'm aware, the cheapest new OM in town is 3.39% (Firstdirect/HSBC) which tracks with BoE rates. I would switch or keep it at 3.95% (if they are tracked ) as they are hard to come by now a days.

Hold on to your equity or perhaps release some extra by remortgaging on the existing offset account. Re: CC debt, with rising interest rates on credit card accounts, it is indeed a good idea to start paying off rather than consolidating debts. I don't think there are any offset mortgage providers out there that would allow you to offset credit card accounts. The One account used to do it, but they do not offer that anymore.

HTH

sashanut wrote: »

Hi all
I wonder if anyone can offer advice as to our offset mortgage which was with the Woolwich (now Barclays) about 10-11 yrs ago. It was initially set up as at the time we were (& are) small business owners who had a lot of income so it was thought we could put money in there & offset it. Well, it didn't happen like that & in fact we have not only run up a lot of cc debt but have struggled to pay our way due to lack of funds & of course the offset mortgage has not been suitable & we have also used up the mortgage current reserve as well due to our situation.

It looks as if we might - & I stress MIGHT - be turning the corner with our income & can at last start to chip away at our debt mountain. My DH thinks that the mortgage will have to stay as it is because mortgages are hard to come by but I am thinking that it might be possible to move it ? Also we may be able to park some money at last in the account (saving for tax bills & etc), would this be the best way forward? I can give some figures:

Main mortgage ac: £95,158.89
Mortgage current a/c: £52,228.15

it says offset mortgagre rate on the statement as 3.95%, we pay monthy £1113

The property has lots of equity....not sure exactly how much but before credit crunch I would think it was worth approx £500,000. Next door house sold for £460,000 & it is smaller with less land (we have 1/2 acre). We also have 2 more properties (both rented out), one is is wholly owned by our company (no mortgage) & the other one is a terraced house with a endownment mortgage for £38,000 but was worth £100,000+ before credit crunch.

However, we have a large amount of CC debt & have just about kept our heads above water & paid the bills (min pymnts).

Would be very grateful for any advice re the mortgage or your thoughts on what would be the best thing to do if our income picks up as we hope ..I know to start paying off the most expensive cc first & cut back on all expenses as much as poss. Any thought much appreciated - we are asset-rich but cash poor & paying a lot of interest. We don't have a good credit record so have trouble switching cards etc to 0% deals.

Any thoughts/wisdom much appreciated!

hpuse

All First Direct offset tracker mortgages are interest only.
The 'extra loan' that was offered would have been as an incentive during the time of approval.

Since the approval is valid they are treating it as a separate loan, not as a topped up loan on your existing OM.

k1mmie wrote: »

I am totally confused.

Hubby and I took out a mortgage with FD around 2003. This was sold as a repayment and is linked to the base rate. So not complaining as it is at a good rate now with the drop.

We then borrowed some extra but was told that the loan to value would be exceeded and this had to be taken as a seperate amount and consequently a seperate repayment was set - but this is all set under a mortgage account number linked to the original.

My confusion is as house prices have risen since this was taken out (even with the fall recently) why FD cannot just add the whole amount together and make it one loan. It is so confusing and the additional borrowing is very expensive. When we asked a few years ago about this and turning it all into one payment we were told that they do not operate a repayment mortgage as such and it is now referred to as a tracker with additional borrowing and they could not do this.

We are not in a position to be able to change at the moment to another lender, but was wondering if anybody else has this problem.

CHEVY

Hi Forum

Straight shoot out question. Would be grateful for any responses.

Re-mortgage. Due at end of Feb. Only two products being considered - best Fixed Rate vs Best Offset.

Abbey Fixed 2year @ 3.99% (£1k fee) vs FD Offset @ 3.39% Lifetime Tracker (1.89% over Base)

Mortgage of £300k required. Have £40k in an Egg Savings account which could switch to help the Offset (ie £260k loan and £40k Offset account).

We're unlikely to have to get to the £40k (unless 2009 is bleaker than even our worst scenario calculations).

On the face of it the 3.39% Tracker is a better deal than the 3.99% - assuming that the base rate goes lower / doesn't rise significantly in the next 24 months. Plus the ability to Offset £40k makes it better still.

But am I making some glaring, schoolboy error in these calculations?

Thanks again for taking the time to help.

Chevy

ricky_south

I went into my standard life product for its offset facility.

This product is not a offset. it uses interest on your savings account (they label offset) to repay the mortgage.

they use the term offset to define the following.
linking a savings accounts generated interest to repay a mortgage.
Below is an example.

if you have a mortgage of £200,000 and monthly repayments of £1000p/m and then place £100,000 in the offset account you still pay £1000 per month. the £6000 intrest you earn then goes towards repaying the £200,000 effectivly reducing to £194,000. this does not reduce your monthly repayments apart from a fraction (after the year you pay £970p/m).
If like me you like interest only this product is no good.


This is the only way their offset functions as i have complained many time with no change.
they miss sell this product with even their video on they website misleading customers making it look like a woolwich offset.

Below is a further warning about standard life.
They started raise their svr early in 2007 without a change to the bank of england base rate, then did not pass on any reduction to the base rate.
the last 4% reduction in boe base rate has now only been partly lowered leaving them with the worst svr on the market.

I am out the first chance i get with my finger up at them.
thank you for reading my rant. its been building up in me for a while

ricky

Mr._Nice

While the product may not offer the full flexibility people may have come to expect from an "offset" mortgage, it is still an offset mortgage, because all that refers to is that one or more accounts are offset against your mortgage when interest is calculated. There is a vital legal difference between doing this and using the interest generated by one account to repay another, since that leaves the interest on the savings liable to tax.

ricky_south

I guess then it is worth pointing out to all thinking about a offset to be aware of the types of offset you are looking at.


their are 3 main types of offset

1, what i consider to be offset such as the woolwich http://www.offsetworld.co.uk/Offset_mortgage_reviews/Woolwich-offset-mortgage-review.php and Intelligent finance http://www.offsetworld.co.uk/Offset_mortgage_reviews/Intelligent-Finance-offset-mortgage-review.php .
with these your savings lower your monthly repayments or term.....you choose.

2, and 3 aren't worth the time to explain apart from they mainly allow you to reduce your term and pay the mortgage off early.click on link for full example.
these are companies such as
standard life http://www.offsetworld.co.uk/Offset_mortgage_reviews/Standard_Life-offset-mortgage-review.php
scottish widows http://www.offsetworld.co.uk/Offset_mortgage_reviews/Scottish_Widows-offset-mortgage-review.php
abbey http://www.offsetworld.co.uk/Offset_mortgage_reviews/Abbey-offset-mortgage-review.php
one account http://www.offsetworld.co.uk/Offset_mortgage_reviews/One-Account-offset-mortgage-review.php
norwich and peterborugh http://www.offsetworld.co.uk/Offset_mortgage_reviews/Norwich-&-Peterborough-offset-mortgage-review.php

i was lazy when chosing a product 2 years ago and because of this it has cost me over £6000 to date (thanks to standard life) than if i went with my other option with the woolwich. this mainly due to woolwich offering a 0.6% above BOE tracker vs standard life SVR tracker but also due to the type of offset i picked ignorantly.
hope that clears thing up.

ricky

jamesd

CHEVY wrote: »

Abbey Fixed 2year @ 3.99% (£1k fee)

Too short a fix. That'll probably be ending during the peak interest rate period being used to fight inflation. Five years would be a better idea, maybe three if you want to cut it close.

CHEVY wrote: »

FD Offset @ 3.39% Lifetime Tracker (1.89% over Base)

You'll benefit from the reduced rates during this year to help reduce the pain of the likely large increase in rates next year for a year or five. Looks like the better deal of the two.

CHEVY

Thanks JamesD. I'm really looking for something sensible that acts as a 'stepping stone' across the next couple of (tricky) years. The Offset rate is good - and the 14 week 'waiting list' says that I'm not alone in spotting the deal. Just wanted to see whether there was something negative in the product that I'm not seeing.

Chevy

FT29

CHEVY wrote: »

14 week 'waiting list'

Ouch - I was thinking of applying! Is this 14 weeks expected for completion or to even start looking at the application do you know?

Thanks.

CHEVY

FT29 - Completion I understand. I'm speaking to them this morning so will find out.