What are the downsides of an offset mortgage?

zagubov

First Direct Offset mortgages are nominally interest-only but will provide info for how to repay them as if they are repayment.

They are very flexible but if you decide to convert them to a repayment mortgage, they're unnecessarily argumentative, but will give way eventually out of logical necessity. You'll find yourself amazed that you're the one paying them for the service of renting money from them, although they might call it borrowing.

lisyloo

I believe there!!!8217;s a downside if you ever need to claim means tested benefits.

If you have say £200k mortgage and £100k savings then you!!!8217;re counted as having the savings.
If you just had £100k mortgage then you have no savings.

I!!!8217;ve personally not worried about this because I!!!8217;m married and we both work and we!!!8217;ve never been in a position to claim benefits in the last 28 years (apart from JSA which is not means tested).

silvercar

lisyloo wrote: »

I believe there's a downside if you ever need to claim means tested benefits.

If you have say £200k mortgage and £100k savings then you!!!8217;re counted as having the savings.
If you just had £100k mortgage then you have no savings.

I've personally not worried about this because I'm married and we both work and we've never been in a position to claim benefits in the last 28 years (apart from JSA which is not means tested).

It depends how the offset is structured. Some just have a negative balance each month, so no separate savings pot.

getmore4less

The one account was a CAM style(securd OD) offset BUT that was a rubbish product with high rates.

Barclays could be structured as interest only and as a CAM using the mortgage current account BUT they have changed how that works so it may no be possible now.

Not sure if any of the current lenders offer CAM style now.

Thrugelmir

zagubov wrote: »

They are very flexible but if you decide to convert them to a repayment mortgage, they're unnecessarily argumentative, but will give way eventually out of logical necessity.

Regulatory requirements have required lenders to take certain actions for some time now. Switching from interest only to repayment being one particular instance. An argumentative customer is a call centre operatives worst nightmare.

chuang6

I came across some major problems with First Direct offset mortgage. My fixed rate will end in one month and their offset product rates are almost 1% higher than repayment product rates, Much higher than before. In the past typically about 0.5% higher than repayment rate. We had a lot of debates with First direct customer service reps. They now can offer me lower rate but with Repayment scheme. this will save me a lot of interest money. But I am not sure as I will lose all the flexibility associated with Offset (it links with my First Direct Current Account).. Anyone would have some insight as why mortgage industry and First Direct make very high rates for Offset mortgage now? What would be my best choice. Thank you!!

chuang6

I came across some major problems with First Direct offset mortgage. My fixed rate will end in one month and their offset product rates are almost 1% higher than repayment products, Much higher than before. In the past typically about 0.5% higher than repayment. We had a lot of debates with First direct customer services. They now can offer me lower rate but with Repayment scheme. this will save me a lot of interest money. But I am not sure as I will lose all the flexibility associated with Offset (it links with my First Direct Current Account).. Anyone would have some insight as why mortgage industry and First Direct offer very high rate for their Offset mortgage now? What would be my best choice. Thank you!!

chuang6

I have 200,000 Interest only Offset with First Direct, the rate of 1.8% will end in Jan.

They offered me 2.7% fix for two years which I found it very high, as my LTV is only 50%.

We debated a lot and we reviewed the First Direct Repayment Products. They can offer me 1.5% 5 year fix for Repayment like 15 years. It saves a lot of Interest money, but I lose all the access to saving and flexibility. Any advices are appreciated!! Please share your thoughts.

[Deleted User]

chuang6 wrote: »

Anyone would have some insight as why mortgage industry and First Direct offer very high rate for their Offset mortgage now?

Because they've never been the cheapest and the market fluctuates. But that doesn't really matter.

You need to look around to find the most appropriate mortgage for you. If you're not sure, use a broker.

csgohan4

Offset mortgage usually won't beat traditional mortgages, you pay for the advantage of having savings to offset your mortgage as so to speak

Speak to a broker to see what your options are