Whatever Happened To Offset Accounts?

Hoenir

friolento said:

Hoenir said:

Virgin One accounts weren't the same as offset mortgages. Ultimately proved too flexible. RBS ended up paying some customers compensation. The account wouldn't meet post GFC mortgage regulations. From another era when regulation can best be described as light touch. We all know what the result was in the end. 

I loved my One Account.

Not everyone has the self financial discipline to handle such an account. Personal circumstances can also rapdly change. 

friolento

Hoenir said:

friolento said:

Hoenir said:

Virgin One accounts weren't the same as offset mortgages. Ultimately proved too flexible. RBS ended up paying some customers compensation. The account wouldn't meet post GFC mortgage regulations. From another era when regulation can best be described as light touch. We all know what the result was in the end. 

I loved my One Account.

Not everyone has the self financial discipline to handle such an account. Personal circumstances can also rapdly change. 

I didn't say the account was for everyone, and it's obvious that personal circumstances can change rapidly whatever mortgage arrangements people have.

Please just accept that I loved my OneAccount. It provided me with amazing flexibility, including the option to borrow substantial additional amounts without any admin, and to pay off my mortgage without penalty more than 10 years early.

lr1277

Yorkshire building Scot are still offering offset mortgages on their website. Never had one myself though.

Though I did have an interest only mortgage with Nationwide. If I made overpayments, they would allow me to take out a maximum of the sum of my overpayments. So the overpayments reduced the interest I paid unless I took any of those overpayments back out. A sort of offset light mortgage perhaps?

Snozzle

We still have one with c 6 years to run. Though the interest rate has shot up in value a we've been on a lifetime tracker from the word go. 

Will run with it, as it's so convenient to have the leverage without worry.  Having said that trying not to borrow as much as we used to now the interest rate is 6%.

boingy

I loved our Virgin One account too. It was perfect for my mindset and it made an awkward house move much more straightforward. We moved into a new house three months before the sale of the old one completed. Without the One account we'd have had a bridging loan, loads more fees and loads more stress. Plus I was self-employed at the time so the One account was the perfect place to stash all the money destined for HMRC and the VAT man. It saved us thousands in interest over the years.

I'm surprised some of you have managed to keep one with zero balance for so long. About two years after we reached zero they asked us to close it.

amanda1024

Offset mortgages are still around, but when you can get better rates on fixed term mortgages + savings accounts, it's hard to see the point - better to be paid the difference between savings interest (>5% atm) and mortgage interest (4.5% deals available) than to receive zero interest on the savings/mortgage offset plus paying >6% for any residual mortgage balance. Potentially still worth it to avoid tax on savings interest if other tax-free options have been maxed out though. 

someone

We have had almost a decade and a half of sub 1% interest rates and during that period the regulatory environment has shifted too. I also wonder if property prices to income ratio increasing is also a factor.

What's interesting is the setup of the personal tax system and fiscal drag pulling more people into the 40% and 60% tax brackets. It means with higher interest rates more people would possibly benefit from offset products.

The YBS product has an interesting feature. With "Offset Plus" family and friends can designate their saving to offset your mortgage. I can see 40% and 60% tax bracket parents who are mortgage free been attracted to this. In effect they "gift" the interest tax free to their mortgage holding child. The effect of this gift could be significant as it would allow the child to pay more of the capital early in their mortgage period. The parents still have access to the money, it always remains their money with access allowed. I also think it would be outside the scope of inheritance tax ... no money or assets are exchanged - its just offset.

surreysaver

I have one with five years left to run. Life time tracker at 0.75% above the base rate (so was paying less than 1% for years). Its only recently its been worth being fully offset, as has been more profitable to put the money into savings 
In the beginning I'd take out 0% credit cards and put the money in the mortgage - that always used to be worth it
Its like an ISA - as you don't pay tax on the interest

silvercar

Had one for the last 20+ years, finishes in 2026. Has served us well, especially as it’s a base rate tracker.

daveyjp

The Santander mortgage we had was an offset, but it was never marketed as such, just a fully flexible base rate tracker.

Any over payments reduced the term, but could also be borrowed back at any time without extending the mortgage period.  Worked really well when we did some improvements as it was very cheap borrowing and no application process.