The One Account - Stick Or Switch

campbell@southport

Hi all - my first message, so by gentle with me.

I wondered if anyone has any tips. We are planning an extension costing £40k and need to raise this on our mortgage.
Current borrowing on One Account is 53K, facility at 70K.

To borrow what we need and keep our "reserves of cash on account", One Account have quoted nearly £900 per month for £110,000.

I've seen such lower rates advertised with fixed deals etc, I'm wondering now whether or not it would be best to switch to one of these.

Has anyone out there had a similar scenario to deal with? Love to hear from you.

payless

Base rates on the One Account CAM currently vary from 5.85 to 6.7 depending on LTV
(5.7 - 6.2 on their flex mtg, after initial discounts ) BUT come with features not found on many other deals, so will depend on what esle you use, and whether you would be willing to transfer to
Mtg to Better mortgage rate
Saving & Current account to standalone products

Hobo_2

Hi OP,(how many yrs to borrow?) you are getting on for doubling you mtg borrowing, if £900 pm seems alot now what about when interest rates rise!
Maybe best to lock in to one of the better fixed deals about at the mo.
I`ve just moved from the One account to be 1.12% lower on int rate with 3yr disc deal @ £78K saving circa £75pcm.

bunking_off

It's all down to how much you're using the flexibility.

I'm working back without knowing the value of your house (it affects the interest rate), but if you have an outstanding amount of £93K and will have to pay £900/month, that implies that you've got approx 12 years outstanding on your mortgage.

So, how does 12 years compare to how long you would have had left using more conventional techniques? E.g. if you notionally started on a 25 year term 6 years ago, that'd imply that you've knocked 7 years of the mortgage term via overpaying (25 minus 6 = should have 19 yrs left but have actually got 12). That would suggest that you're using the overpayment/flexibility aspect of the One Account quite substantially, and you'd notice if you were bound by a more conventional mortage (*).

(*) I know you can overpay on other mortgages, but (a) there's generally limits and (b) you've got to take conscious effort to actually do it, whereas with a One Account it just "happens" if you spend less than you earn.

If, on the other hand, you started on a notional 20 year term to repay your account 8 years ago, then clearly you're not repaying any more quickly than you would have with a conventional mortgage, so you might as well go for that and get the lower rates.

Simply comparing rates directly is a bit like comparing apples with pears. Yes, you can get a rate 1 or 2% lower than the One Account on a conventional mortgage, but if the consequence is you don't overpay as much so end up paying (lower) interest charges for a longer term than you would have done with the OA, the whole life cost might actually be higher.

One final point, what house valuation is the quote based upon? One Account rates are set according to the level of the facility versus house valuation. If, by adding the extension, you add, say, £60k to the value of your house, you could find that you fall into a lower "band" and the interest rate could fall.

Me? After using the One Account for a few years I could never go back to normality. However, no two people are the same and I wouldn't quibble if you opted for the simplicity of a lower rate. Be interested to see what the churn rate on One Accounts is versus conventional mortages....I suspect considerably less.

Hobo_2

Yes it`s all down to personal circumstances really (eg. tax status etc) but general opinion( see offset mtg sticky) seems to be at least 50% + in cam/offset account required to be beneficial, which OP is well short of.