Cash back mortgage???

nicolapaulbertie

Hi, could someone help me please. I currently have my mortgage plus everything else with the Virgin one account. I've seen the advert for The Chelsea giving 6% cash back and I'm unsure if this is a good idea. My current interest rate is 6.15%, but obviously all my money is in there, so it's offset. Thank you!

herbiesjp

Depending on your circumstances you could get a lower offset mortgage than the 6.15% on the One Account you say you are paying.

Do you need the cashback? Or do you want a lower offset rate?

nicolapaulbertie

The cashback is very tempting, but the interest rate is slightly higher, but obviously all of my money wouldn't be with the new lender. I've worked out that on the £8,000 cash back, it would take me 13 years to save the difference in interest rates, ignoring offset benefits. Does that make sense? Are there lower offset rates available?

payless

The deal mentioned comes with their highish - SVR
other cashbacks have lower charge rates, or if looking long term it might be worth just looking at lower rates ( no cashback) with or without offset option

herbiesjp

Sorry- what exactly do you mean all of your money wouldn't be with the new lender?

MarkyMarkD

I can't see why anyone who thinks they have enough money to make offset worthwhile (and you need a LOT of spare money for offset to be worthwhile), would then want to get a cashback mortgage.

Unless you actually need to go spend all the cash you currently have offset, AND the cashback, you shouldn't be considering this at all.

If you just need SOME cash to spend, so you won't have very much (or any) offset, you should ditch the offset and get a better value discounted/fixed mortgage.

Cashback products are almost ALWAYS worse value than a discount/fixed for the equivalent term - they are only sensible for those who really need the cash e.g. for home improvements.

Xbigman

nicolapaulbertie wrote:

The cashback is very tempting, but the interest rate is slightly higher, but obviously all of my money wouldn't be with the new lender. I've worked out that on the £8,000 cash back, it would take me 13 years to save the difference in interest rates, ignoring offset benefits. Does that make sense? Are there lower offset rates available?

I can see what you are getting at with the 13 years but you are only comparing two products and over a very long timescale. My own rule of thumb is not to change if I can't save money in a year or a lot of money in two years.

If you just have savings for nothing in particular then you are better off with a good fixed deal and use those savings to reduce the size of the mortgage. We seem to be moving into a lower interest rate period so fixing early next year should be a good bet.
Regards



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