The One Account?

SALTY69

I have today been today to the local Nat West to discuss the One Account with the Mortgage advisor. I only have a Mortgage of £27900 left and over 8years 3 months left, but i have a couple ov credit cards with £3000, on them i thought i might add this to a One Account and add the £3000 off the cards to it and have it over 9 years, I would be making overpayments of about £350 a month. i have read Martin,s piece on the One Account does anyone have more information as in It is Good or Steer clear?

salty69

wymondham

Not sure what the min amount is, but i think it could be £30k so you might scrape in. The One Account is great if you are disciplined with your cash, as overpayments are fully automatic (whatever you don't spend each month). The rates are not great (but for the amount you're after that should not really matter too much), but the flexibility can't be beaten and customer service is amoungst the best in the business (UK Based). You'll find lots about this account if you search, but basically it's a marmite account (some people LOVE it, and some people HATE it). If it works for you then you end up getting rid of your mortgage quicker than you imagined, but it is easy to fall foul and blow the lot, so it hinges on how you manage your money and how much you trust yourself!! I like it as you are left alone to work it how you like, paying how much you can afford each month (get rid of the idea of the 'mortgage payment' as such as it works differently..). The online banking is top notch too, with lots of nice toys!!

It's a good account for lazy people as everything happens automatically (payments, inc overpayments etc...). The way it works is so different to a normal one that it took me months to fully understand it, but now I would never choose a standard mortgage product again!

Their costs are small compared to other mortgages as well - I'm sure my remortgage costs were around the £200 mark all in...

Hope this helps!!

skim

Most Financial Advisors will try & steer you away from The One Account.
One of the reasons is that they will not be able to come back in 2 years & re-mortgage you so they don't get repeat business.

The interest rate is higher than some of the other offset mortgages but I found that it works better for me than others due to the way the repayments are calculated.

I took mine out in Jan this year £70k & now only have £46k outstanding.
It works well for me but like a previous poster said it's a bit like marmite.

Also if you get someone to refer you then you & the referrer both get £150.
If you need referring PM me.

Good Luck

bunking_off

Yup, got a One Account myself. Due to repay in 11 years rather than the originally planned 25. Agree with everything skim & wymondham said.

FreedomGirl

Hi,

I've got a One Account as well (previously Virgin One). Agree with previous posters. Our term has dropped dramatically from the original 25 years - once we saw in black and white how much interest we were paying, then all the savings got offset and we manage cash flow quite carefully. Current predictions are that we will have paid it off in just under 7.5 years.

But - and this is a big but - recently read in the FT that Jayne-Anne Gadhia (the Virgin Money boss, who is part of the bid to take over Northern Rock - she set up the One account) that the profits on that type of account were much higher than on traditional mortages. That's because lots of people don't run the account to take advantage of this.

If you're a contractor/freelancer (high earnings and/or big lump sums) or have substantial savings and can manage your money well, it's a good idea.

It is basically a very large (secured) overdraft, and the temptation to spend is high. My OH would wonder about, pointing at expensive cars, saying we could buy xyz on the Switch. (I would then phone up and reduce the available balance ). We ended up having to take the Switch cards out of our wallets in order to do the final chase of the balance down to zero.

(Um, and yes, I'm the killjoy "financial management" one in the relationship, although the OH is quite happy now we're almost there...but keeps muttering about keeping 30K secured overdraft "just in case")

So, decision re One account may also need to take into account your home and family circumstances and how money is run in your house.

HTH

FG
ps OH has just pointed out the One account is not cheap

chickadee

You seem to be getting lots of the LOVE it posters telling you about the One Account. I'm no different I'm afraid. I keep a very close eye on my balance, and have various spreadsheets to monitor it but I love it too.

It requires a different mindset to manage it, as there are no minimum monthy repayments to make and nobody chases you if you aren't reducing your balance, although you are given regular information, internet access and good uk-based telephone banking. It is really more like running a big overdraft and it takes some guts to look at your ATM receipts as they say £XX,XXXDR. Make sure you are disciplined enough to manage it, but go for it! It isn't the cheapest mortgage to run, but in terms of flexibility and customer service, it is second to none.

Kaz2904

I've just had a look at this and it's frighteningly expensive!
I have a fixed rate mortgage which I can overpay by 5* the amount (So 6 lots of the usual payment are allowed).
This works well for me as I can't pay in more than £3800 in a month.
If you are looking to overpay by about £350 per month then you would probably be better off by clearing the credit cards over the next year by snowballing them and balance transferring them and then chuck every spare penny at the mortgage.
You may even find yourself wanting to balance transfer some money off your mortgage so that you can clear it quicker- this would work well with the one account.

There are other offset mortgages around though so be careful.
You don't mention if you have any savings- as far as I know you should have savings equal to 1/3 of your outstanding balance in order to save money on this mortgage.
Hope the flipside argument helps you!

wymondham

Kaz2904 wrote: »

I've just had a look at this and it's frighteningly expensive!

I disagree with this, for the amounts the OP has it does not make too much difference about the rate. If the way the account works is beneficial to the OP and they are financially sensible then this outweighs the interest rate on this occasion, but I DO agree if you have a large mortgage and you don't have much left over each month then it could be an expensive option and not appropriate for you - remember this account is designed for very specific people, with specific circumstances, the problem is that it is marketed as just another mortgage product generally available and suitable for all, which is when problems start...

As an example, my repayment mortgage was higher than the amount to the OP when started last April - I now pay a reducing amount (currently £33) on interest payments each month and mortgage will be settled by the end of this year (all going well :rolleyes: ) - If you use the One Account as it is intended to the full then I don't consider this to be expensive at all, and it has saved me a considerable amount. A big plus is that even when 'paid off' I'll have access to all the funds if need be until I close the account or redeem the mortgage.

If you search on this, you'll not find many people who actually have a One Account complain about it (if you find one that does then they probably were not suitable to start with) - I think this speaks volumes. The posters who are negative about it tend to look at the rate and nothing else - whilst it is important, it's not the whole story...

I agree with earlier post that advisors don't like it as they don't get any repeat business! With this account it lasts the life of your mortgage, so don't forget to factor in all those remortgage costs every 2 or 5 years you WON'T need to pay, along with the hassle!! (I've not seen this point raised anywhere else and it could amount to thousands in saved costs over the whole term!)

jamesd

SALTY69 wrote: »

I would be making overpayments of about £350 a month.

Steer clear in your case. The One Account flexibility is best for people who are putting in and taking out a high percentage of their mortgage each month. Your plan is to overpay regularly, not put in and take out say 50% of the mortgage each month.

For your plan a lower interest rate flexible mortgage is fine, since that lets you overpay regularly or with lump sums and from time to time take out some of the overpaid money if desired.

If you think you'd more regularly want to take out the money overpaid, an offset mortgage would be the next option. The savings account here lets you regularly put in and take out money, just like a normal savings account.

The One Account and other current account mortgages only really strongly come into their own when it's for regular in and out in the same month.

For those with irregular work a cheaper alternative to the One Account is an offset mortgage for say 20k more than needed, then immediately deposit the 20k extra into the offset account. No interest to pay on it but if you hit a poor work patch it's there to be drawn from.

All of these options let you save interest by overpaying if you like. But without the very high interest rate of the One Account. One caution with interest saved calculations: because the One Account interest rate is so high, that also means that its calculated savings are also higher than for cheaper mortgages. Don't look at the interest saved number. Look at the total you still have to pay: that's what's coming out of your pocket!

Given the fairly low mortgage amount you can usefully look for a lifetime tracker mortgage so you won't need to remortgage again before the mortgage ends. You're now at the point where remortgaging costs can be significant and are best avoided.

Martin is correct to recommend against the One Account. It's almost always possible to do better.

wymondham, skim, bunking_off, FreedomGirl, chickadee, just for fun, try working out what you'd have paid if you made exactly the same payments into a competitive offset mortgage offset account. I'm curious about just how much more the One Account has cost you so far. If you're using the flexibility to not make any payments, or paying 50% into the account and taking 50% out each month, no reason to do this: you're using the flexibility so it may well be suitable for you regardless of the interest rate cost.

SALTY69

Thanks for all the information, We will be paying into the account £2200 per month, Won,t be spending on cars already got a Jag lol. We will be only taking out the normal expenses a month which are normal bills around £500 and thats including food. Only 2 of us so not much going out. i need to get rid of the Credit Cards and that will free up £350 on it's own then on top of that with overtime etc it may possibly leave another £500 to mess around with so that could be used as well. seems a good account but i will ask about others on Thursday when i go back to the Bank. I will be Credit card free too which can't be a bad thing.

wymondham

jamesd wrote: »

wymondham, skim, bunking_off, FreedomGirl, chickadee, just for fun, try working out what you'd have paid if you made exactly the same payments into a competitive offset mortgage offset account. I'm curious about just how much more the One Account has cost you so far. If you're using the flexibility to not make any payments, or paying 50% into the account and taking 50% out each month, no reason to do this: you're using the flexibility so it may well be suitable for you regardless of the interest rate cost.

Not sure how to do this, but just gone through my records and have paid a total of £452 in interest payments since last April on an original £35k loan...

I think that this account could well work for you salty69... You will be automatically overpaying much more than £350 as anything left in the account is used as an overpayment and will reduce your balance at quite a rate judging by the info posted (don't worry, you can still get at it!)