Offset mortgage tracker - fully offset impact

ElitePanda

Hi all,

I currently have an offset mortgage with Barclays which I’ve had for years (offset tracker, repayment). Over the years I’ve increased savings and has been increasingly becoming offset. 

It’s been at the same payment since 2018, and only recently has been increasing. However for the last year, the mortgage has been fully offset. I was under the impression when I took the mortgage out that once it gets fully offset, the payment wouldn’t change. I can’t find clear evidence of this.

I’ve queried with Barclays, and they’re telling me that this is moving with the base rate. I’ve argued that it’s never moved before, and after a lot of investigation they’ve concluded that ‘something is going on’ and ‘they haven’t seen this before’. My understanding is that, whilst I only pay interest on the non-offset amount, should the base rate change, my monthly payments only move to account for this. 

I can’t get a clear answer on if this is correct or not. Barclays say that there has been an error down the line, but will take 8 weeks to resolve. In the interim, my mortgage has gone up by £150 in three months. The net impact is, of course, that I’m just going to pay off my mortgage quicker as I’m purely paying off capital at this point. Should I care? Well, I’d quite like the payments to be lower ideally but I can’t get a clear answer.

So the question is: if my mortgage is fully offset, should I expect my monthly repayment to change with the interest rate? Barclays don’t know. 

housebuyer143

I'm not sure on that, but as you are just paying off capital can't you just take the extra £150 out the offset account each month to get it back? 
If it's fully offset that should have the effect of keeping the outstanding balance and the money in the savings the same? 

id311299

Is it possible that your 'Contractual payment amount' is changing with the interest rate changes, with the level of offsetting having no relevance to it? Monthly contractual payment amounts with Barclays are elusive beasts. Read your contract carefully with focus on how the contractual monthly payment is calculated and/or changes.

I am not sure what left you with the impression that 'once it gets fully offset, the payment wouldn’t change', but unless specifically stipulated in your contract, the default position is that the contractual monthly payment will follow the same logic regardless of how much of the balance is offset.

Can you not just set up the direct debit payment to be coming from the offset account, and forget about it? It wouldn't really matter how much it is per month, as there will always be enough funds (provided you don't touch the offset savings) and the outstanding balance will always go down in lockstep with the offset, so you still pay zero interest.

dimbo61

We also have am Offset mortgage with Barclays which was fixed for 2 years and then went on a tracker deal IE Bank of England base rate plus x.x%

Now the BOE base rate has been 0.5/0.1% for the best part of 5 years so you might not have noticed any change in your mortgage but with the BOE rate going from 0.1% to 3% tracker mortgage seem to be going up every month with 6 increases this year.
So well done your fully offset and making nothing but Repayments every month ( No interest because your fully offset)
However your payments have gone up by £150 a month so your repaying an extra £150 a month. Result mortgage paid off even quicker.
You also have access to cheap borrowing if needed

ElitePanda

Thanks all. My partner and I were both off that perception from the initial meeting when we set the mortgage up that the payments wouldn't change once we were offset, so potentially a joint misunderstanding, or a mis-speak but it was years ago now so it is what it is. 

Glover1862

ElitePanda said:

Thanks all. My partner and I were both off that perception from the initial meeting when we set the mortgage up that the payments wouldn't change once we were offset, so potentially a joint misunderstanding, or a mis-speak but it was years ago now so it is what it is. 

Did set it up to reduce payments or reduce term? I'm with Coventry and you get a choice, I chose to reduce my payments and like you was hoping once I'm fully offset the payments stay the same and only the capital is being paid off. Coventry allow you to take payments from the saving account to pay the mortgage so not too much of a problem, but would be good to get an answer.

I've used the tool on the Coventry website, and it gives some odd results saying I'll have significant increases in payments in the later years, doesn't make sense to me. 

Offset calculator | the Coventry for intermediaries (coventrybuildingsociety.co.uk)

surreysaver

I've got an offset with Santander, and have fully offset recently. I am expecting the payments to go up with the interest rate change, but am expecting to have to withdraw money from the savings on the same day as the payment, otherwise I will have more in savings in the offset account than I have mortgage balance

johnbhoy70

We've an interest only Offset with FD and they must be different as we just pay ad-hoc capital payments as and when we want to. We're fully offset too now. It's been that long since we've had it (must be well over 10 years) that i can't remember if FD asked us to set up monthly payments at the outset.