Mortgage advisors/Offset mortgages

robatwork

I heard on the radio (think it was the FT money show) that

"people inside the mortgage industry nearly all have offset mortgages"

with the comment being that a lot of the great unwashed (ie. clients) don't understand them, are fearful, prefer the simple calculation of chipping away at the principal etc.

Is this true?

Senior_Paper_Monitor

It is probably true that since a high percentage of mortgage brokers (and associated distribution partners)
1) have fluctuating income patterns
2) see themselves as better able to 'play' with available funds - many have BTLs etc
.... the propensity to take offset solutions is greater than standard employed and married client with 2.4 kids.


Mr Standard is more likely (and often better suited) to consider the rate and/or monthly payment as the most important priority (most offsets come at a premium).

amnblog

SPM is right.

It is more about the average mortgage broker having an income pattern that can suit an offset mortgage, than because these contracts are difficult to understand.

Not too many offset deals on the market currently and they tend to be priced a noticeable amount above standard product. Generally not a good idea unless you are going to offset tens of thousands of pounds.

ACG

Offset mortgages generally have a higher interest rate but if you get lump sums of money/bonuses from work etc they can be a good idea to help you pay less interest overall if you are happy to throw money at the mortgage... you can withdraw it down the line if you wish.

I dont think they are difficult to explain and have done a few of them but they are only really suitable for certain types of people. Personally I dont have one and of the brokers I know I dont think any do.

They have their place but if you are mr/mrs average (ie a set wage each month with no major bonuses/commission etc with no large savings accounts) then its probably not for you.

dimbo61

First of all I LOVE OFFSET mortgages and have used them to pay down debt very quickly over the last 8/10 years.
Was with YBS where most if not all Offset deals cost 0.2% more than a fixed or tracker deal.
Now moved to Woolwich and happy to be offsetting all our savings against the mortgage.
I think they are great for many groups of people IE Self Employed as you can build up savings in the offset account when Times are good which can cover for Quiet times at work!
All your savings are Saving your mortgage rate TAX FREE

JudyLemieux

The best way to get best Offset mortgages just compare it with others. Offset mortgages provide a practical and sophisticated means of balancing your savings against the debt of your mortgage and they are becoming increasingly popular among the nation's homeowners.

amnblog

was that cut and paste by any chance?

getmore4less

There was a time when you could stooze £10,000s on credit cards for free and the margins/fees on the offset mortgage were very low.

We got no fee move to the Woolwich years back for base +0.95 which was not much more than the trackers at the time.

Woolwich you can offset ISA so can build them up for future use


now with savings rates so low the amount of savings needed is not as high as many think.

Simple ratio of interest rate.
M : mortgage debt
S : standard rate
O : offset rate

C : savings capital
N : net savings rate

C/M == (O-S)/(O-N)

---

There was a long running thread on offsets

https://forums.moneysavingexpert.com/discussion/471

Let_Us_See

Offset mortgages are fine for the person with sufficient savings to make the higher rate viable to offset!

I wrote more offsets before the crash of 2007 - 08, and I have personally never had an offset scheme. Apart from dimbo61 how many other mortgage professionals currently have an offset scheme?

amnblog

I think the quote from the FT money show was just thinking out load.


As far I am aware, the CML do not keep separate stats on mortgages held by mortgage brokers!


Most of the existing offset deals I see coming in are kept less because of the offset feature and more because they were taken on base +0.5 type rates in 2007.

getmore4less

The benchmark for offsets used to be First Direct.

differential in early 2012 was 0.3% now they are 0.8% so less attractive.