Offset mortgages and London & Country

jen_fpb

Apart from when I very first bought a house, I have always used London and Country to remortage and have been impressed with them. Recommending them where I can.

We remortgaged at the end of last year with a 2 year fix that started in January of this year. When we remortgaged we spoke to L&C and they made us aware of offset mortgages. We hadn't heard of these before but seemed ideal for us as we have large amount of savings but want them there "just in case" rather than paying off the mortgage. At the time of this remortgage I was on maternity leave, unsure of the hours I was going to return on so we didn't qualify based on this. Due to the uncertainty with interest rates we remortgaged on a 2 year fixed. 

Having jumped from 1.14% (old mortgage) to our new one of 5.56% we saw on paper quite how much interest we are paying and have therefore been looking at paying the ERC to come out of our existing mortgage and going to an offset mortgage, we are in a lucky position where we are able to 100% offset.

We have spoken to L&C and they are comparing only on 17 months (the remaining time of the mortgage) and say that it's not worth it due to product fee and higher interest rate. We have factored in the ERC and as we are 100% offsetting interest rate isn't relevant to us really. They are only looking at 17 months and not longer - whereas over the term of the mortgage on all the offset calculators online (including on this site) we would be paying our mortgage off at least 4 years sooner which is very attractive to us.

L&C are taking into account a product fee but I've found Yorkshire Building Society do an offset with no product fee. However, having read on here YBS aren't available via brokers. Whilst I am used to remortgaging I haven't done it "solo" before without L&C helping/guiding. How easy is this to do? Will we need to pay for legal fees/solicitors? 

On an offset with where we are 100% offsetting, how do our monthly payments work?

Any experience with Yorkshire Building Society? We have a branch in the next town so could go and visit if needed/any issues. We were very impressed with their website on offset mortgages when compared to other banks/building societies.

Any comments/thoughts would be appreciated! 

housebuyer143

YBS are excellent. I use them for interest only and have no problems at all with them. I'm planning to move to the offset potentially next year. 

 When looking at the offset they sell, you need to see if it comes with free legals and valuation because of not, that's a big cost to take into account. I tend to look at it as L&C do, so comparing the products only over the chosen term because most people are moving products at the end of the fixed term. I find it easier to get a picture of the real product fee cost if I factor it over the 24 months, as a comparison. 

Also, you need to be looking at your savings at the moment and see what you are getting interest wise on those. If you are getting 5% on the savings then are you really saving anything at all paying the ERC to move early? I assume your savings are not just earning nothing. 
You need to really work out your yearly mortgage interest, the amount you are getting on your savings after tax, and then look at the difference. Then you need to factor the ERC into this calculation and see how that looks. 

If you 100% offset you just pay the capital amount each month. 

silvercar

I’ve saved a fortune with an offset interest only tracker. Had it for 20+ years, so no costly remortgaging along the way. I suppose I was lucky in that interest rates were low when I was actually paying interest and now I am fully offset so have no interest to pay. Not only was it a good deal at the time, but it has worked well over the years. Interest only, but the repayment vehicle is the money sitting in the offset savings account linked to the mortgage.

jen_fpb

@silvercar think we'd prefer repayment rather than interest only.

@housebuyer143 thank you for info on YBS. I think at the minute they are offering free legals and valuation. At the moment the savings are earning about 1% less than the mortgage rate as I always want access so never full tie up. I do know I could get more. For us the goal is mortgage free but we do want access to our savings so offset seams ideal. As we will 100% offset we this as benefit, yes we will be losing the interest on the savings but we will gain by not paying interest on the mortgage. 

Are you able to comment in going "solo" as I've not done this before, always gone via L&C

Flugelhorn

I got an offset years back with RBS - no broker involved. Like you had variable savings lodged in it ( did a lot of extra untaxed / self employed locum work) and needed to keep the money accessible to pay HMRC when needed - we ended up with it fully offset and the monthly payments just came off the principal. 

I don't think it makes much difference if you are IO or repayment - if IO you can make sure you save a bit more each month into the pot .

I am sure they don't suit everyone but it was v good for us and we used to get statements telling how much interest we had "saved" - came to a lot of money 

housebuyer143

jen_fpb said:

@silvercar think we'd prefer repayment rather than interest only.

@housebuyer143 thank you for info on YBS. I think at the minute they are offering free legals and valuation. At the moment the savings are earning about 1% less than the mortgage rate as I always want access so never full tie up. I do know I could get more. For us the goal is mortgage free but we do want access to our savings so offset seams ideal. As we will 100% offset we this as benefit, yes we will be losing the interest on the savings but we will gain by not paying interest on the mortgage. 

Are you able to comment in going "solo" as I've not done this before, always gone via L&C

Yeah, it's really easy. Call them up and book in with an advisor, they will go through everything with you and recommend a product at which point you can just tell them the one you want if it's different to the one they recommend. Then they get you to email over the documents they need and you wait - not even that long. 

They are honestly a great company, and they make it all so easy. I moved to them because not only did they do interest only and offset but I feel they have competitive rates so I hope to just product switch with them in subsequent years, rather than having to move to chase the cheapest rates. 

jen_fpb

I went back to L&C stating why I still thought it was worth paying the ERC and switching but they don't think it is. They've said YBS interest rates are due to change tomorrow so our plan is to see what these are and if free valuation/legals still included and if they are we will give them a call to discuss.

Just struggling to deal with paying so much interest when I don't have to (100% offset). I guess moving from 1.14% to 5.56% has just highlighted the amount of interest we pay!

Reviews of YBS, of here and generally seem good. So will see what happens.

Hoenir

If you are 100% offset. Why the urge to change now? As the interest cost is zero. 

jen_fpb

Hoenir said:

If you are 100% offset. Why the urge to change now? As the interest cost is zero. 

We aren't offset at the moment. 

Currently on 5.56% started in January on a 2 year (didn't qualify for offset when we remortgaged due to uncertainty around my working hours on return from mat leave).

Our ERC would be around £1,200 so we thought it would be worth it. L&C say not so we need to crunch more numbers I think.

housebuyer143

jen_fpb said:

I went back to L&C stating why I still thought it was worth paying the ERC and switching but they don't think it is. They've said YBS interest rates are due to change tomorrow so our plan is to see what these are and if free valuation/legals still included and if they are we will give them a call to discuss.

Just struggling to deal with paying so much interest when I don't have to (100% offset). I guess moving from 1.14% to 5.56% has just highlighted the amount of interest we pay!

Reviews of YBS, of here and generally seem good. So will see what happens.

I suppose it depends on how much the ERC is tbh. £1k is a completely different situation to say £5k.

If you decide it's not worth it to move, definitely put your money in better accounts - there are 5.1% flexible ISAs, fixed for a year at over 5%, easy access at 5.02%, 90 days notice for 5.25%.
You shouldn't need all your money readily available. It takes a bit of management but you can be offsetting a lot of your mortgage interest just by using the right savings accounts - at least until you fixed term ends and you can move without paying the ERC. 

It looks like YBS have lowered the rates but taken away the free legals unfortunately. 

jen_fpb

YBS hadn't updated when I looked earlier.

ERC is £1,200

ISA is with nationwide. It's been there for years since I opened it. I do look around but want easy access.