Is the One account any good?

getmore4less

_bankrupted wrote: »

MPwannasavemoney

In the bad old days a bank would charge interest on a mortgage as follows:-

Look at the outstanding amount at the start of the year, charge a years interest on this figure, and then add it to the account immediately. You would then have 12 equal payments (assuming no interest rate changes) to reduce the outstanding amount. At the start of the next year your new outstanding amount would be less than at the start of the previous year.

So those 12 payments were really the interest that was added at the start and a little of the captial that has been reduced.

But the point here is that after your very first payment at the start of each new account year, you no longer owe the bank the original outstanding amount, it has been reduced by the capital that you have paid back in that months payment. So the next month payment should be slightly less since the interest charged should be less as you owe the bank less. But it isn't, the banks method of calculating the loan consider that none of the captial has been reduced. Only at the end of the year do they re-apply a new calculation.

So daily interest is a much cheaper method. You are only paying interest on the money you owe. In the case of the One Account, the interest is calculated over the month on the daily outstanding amount and THEN the interest is added at the end of the month. It is not compounding itself each day.

Not directed at you personally but if someone does not understand the difference in concept between an account that charges yearly interest and one that charges daily, they are unlkely to ever use an offset account to it's maximum potential.

Also it's worth noting that banks generally now calculate daily/monthly interest on most mortgages.

Interest rates and the method of calculation are what actualy determine how much you pay and when banks/BS changed there calculation methods to daily interest they changed the rates to match.

The yearly/monthly/daily cost less in that order is a myth, since the interest rates were different for the different products.(Similar to savings accounts that pay monthly or annual interest have different rates to take account of the compounding)


Understanding the arithmatic for offsets is a tiny part of making best use, Spending less and delaying spends for as long as possible is what makes them work.

strongboes

Seriously why are some posters so against the one account.

It is not acceptable to just compare your 2 year discounted rate and the one account rate. The one account is supposed to be for people who can overpay a large amount each month. Someone who gets paid weekly will benefit even more. It is not for people looking to pay their mortgage off in 10-15 years time, it is for someone who can blast it down in a much shorter time period. It has also been mentioned that it will change your spending habits for the better and allow stoozing. + you dont have to pay endless arrangement fees of £500++ every 2 years. Has anyone considered this in their slating of the account??

wymondham

strongboes wrote: »

Seriously why are some posters so against the one account.

It is not acceptable to just compare your 2 year discounted rate and the one account rate. The one account is supposed to be for people who can overpay a large amount each month. Someone who gets paid weekly will benefit even more. It is not for people looking to pay their mortgage off in 10-15 years time, it is for someone who can blast it down in a much shorter time period. It has also been mentioned that it will change your spending habits for the better and allow stoozing. + you dont have to pay endless arrangement fees of £500++ every 2 years. Has anyone considered this in their slating of the account??

good valid points, but we are among the few as most look at figures only and not the bigger picture of changing your view on money, which I consider to be far more important.

ixwood

The one account is pants! Get over it.

ixwood

"blasting" the account down would be helped by a lower rate. Not that you can get more competitive alternatives, it's a dud imo.

bunking_off

I've got a One Account, and with a balance of only a few £10Ks, most of which stoozed onto 0% / <4% life of balance cards, there's little merit in my paying arrangement fees on a new mortgage to save 1% on the few £Ks balance actually showing on my One Account balance. Might save me £50 in interest a year, at the cost of a few hundred to change.

The One Account's been very good for me (25 yr mortgage will be paid off in 9), but at the same time I'd admit that the benefits of it would equally apply to any current account mortgage with similar features.

However, on a cursory glance the FD products don't quite offer the same degree of flexibility in a few key areas (unless I misread their faqs). Firstly, you don't seem to be able to take an outright payment holiday : there seems to be a requirement that you at least pay sufficient to cover the interest for a given month (see this. Secondly, with a One Account, you have a Facility, and you can borrow up to that whenever you please - note that this Facility can be considerably higher than what you originally borrow to allow future flexibility. With the FD account, you can "borrow back any capital that you've repaid"...there's a subtle difference here : think in terms of starting off borrowing £100k then needing an extra £30k to buy a car...with OA you'd just write a cheque and drive home, whereas if I read correctly with FD you could do so only if you'd repaid down to £70k, or if you go to ask them nicely for a mortgage extension. Finally - not in the ethos of this board admittedly - it looks like FD want you to repay within a given term (I assume 25 yrs), whereas with OA so long as you've repaid prior to retirement, they're happy. These things may not matter to you, in which case FD could be better than OA, but all I'm saying is they're not entirely like-for-like.

Whatever, I agree with Wymondham that any current account mortgage is head & shoulders above an offset. It's that "lifestyle adjustment" thing...the offset doesn't give you a "balance of £x0K overdrawn" when you get a balance display at the cashpoint, hence kick you in the teeth (or perhaps other body area) on a daily basis that the sooner you pay it off, the better. For my money, offsets also con you, because you could have say £100k mortgage outstanding with £30K offset savings, so you think you're rather flush. No you're not, you're £70k in debt. It's that mental/lifestyle adjustment that all current account mortgages are about.

Hobo_2

good points bunking_off

OK most people do look @ the interest rate,
Amazing how the various offsets are so different on closer inspection
You can select Int only be near 100% offset, but they still take the same monthly payment & pay down the capital

Jimboceh

As I understand it with the FD CAM/offset you can indeed 'borrow back' any capital paid off but also you can draw money up to 80% LTV. So much depends on the drive by valuation and the original LTV figure.

happylife

I used to have a Halifax Tracker mortgage and switched to Natwest One account.

Best thing I ever did. the Natwest One online banking is fantastic and I can now see exactly where everything is going. I can set saving plans automatically and move money around although it still stays in one place..

My mortgage is only 26K so I'm on the lowest interest rate at 6.35% but even if the rate increases by 2% I pay peanuts in interest rate...

The main thing is this account helps to manage my spending and budgets. I also have around 10K in emergency savings so I'm getting a better rate lumping it in this than my high interest account or Cash ISA.

I feel secure, comfortable and more in control of my finances using this account.

Highly recommended if you have any emergency savings IMO. Great online backing...

getmore4less

bunking_off wrote: »

However, on a cursory glance the FD products don't quite offer the same degree of flexibility in a few key areas (unless I misread their faqs). Firstly, you don't seem to be able to take an outright payment holiday : there seems to be a requirement that you at least pay sufficient to cover the interest for a given month (see this. Secondly, with a One Account, you have a Facility, and you can borrow up to that whenever you please - note that this Facility can be considerably higher than what you originally borrow to allow future flexibility. With the FD account, you can "borrow back any capital that you've repaid"...there's a subtle difference here : think in terms of starting off borrowing £100k then needing an extra £30k to buy a car...with OA you'd just write a cheque and drive home, whereas if I read correctly with FD you could do so only if you'd repaid down to £70k, or if you go to ask them nicely for a mortgage extension. Finally - not in the ethos of this board admittedly - it looks like FD want you to repay within a given term (I assume 25 yrs), whereas with OA so long as you've repaid prior to retirement, they're happy.
.

To just take the flexability points, and as well as FD add Barclays offset product.

3rd point borrowing back your capital

I know with barclays you can do I/O mortgage so just the same as the one account possibly can do the the same with the FD one.(interest only means the max capital you can borrow to stays the same.

2nd point borrowing more than you need up front

Can do the same with both FD and Barclays, you just borrow more to start with and offset what you don't need.

1st point payment holiday,

Just take the payments out of one of the offset accounts does the same job.

So NO reduced flexability on the basics and loads more flexable options like offseting ISA with Barclays having accounts in differnt names etc.

The one account is just a more restrictive and expensive CA/offset mortgage product. based on the rates I have seen. It would appear that some of those that have them may have failed to do due dilligence and market comparisons, I know when we changed to Barclays the rate was better, there were no cost to move and the features were much more flexable.