Difference between "One Account" and offset mortgage?

Claremac

Hi
I've only just discovered the offset mortgage and am trying to find out more about them so this may be the firat of many questions! I've read about the One Account and seen it compared to "an offset mortgage". I thought that the One Account WAS an offset mortgage. Could someone put me straight please? Thanks.

Clare

natman

Hi. As far as i am aware the one account is an offset mortgage -

That being - where you collate all that you own - i.e savings, salary etc and offset it by what you owe - i.e mortgage

e.g - you have borrowed £100,000
You have in savings £5000, you only pay interest on the £95,000 you have outstanding.
The one account does this and if you look at some posts on here the one accout is discussed along with other offest mortgages.

I think the one account was the first in the UK to come up with this concept, so other competitors call it an offset mortgage.:j

InMyDreams

As I understand it, the 'one account' is just that; one account. That is, you treat it like a current account with a mind-blowing overdraft. With an offset mortgage, you will have (on paper) more than one account. I'm just completing on a FD offset, and as I understand it, I will have a mortgage account, a current account and a savings account. I will operate them independently of each other, and will have some balance in each (positive or negative) but for interest purposes they are treated as one pot of money. So instead of receiving interest on my current and savings account, I will just pay that little bit less on my mortgage.

Numberswise, I think it makes no difference. The difference is only on paper. Personally I wouldn't be prepared to pay the higher interest rate for the convenience of keeping everything together, but others love it and think it is well worth the higher rates.

phizzimum

we have an offset with woolwich/barclays which allows us to have lots of linked accounts. So we have a joint account, personal accounts, joint savings, personal savings, tax account, VAT account etc - I think I would find it a nightmare keeping track of everything if it was just in one big pot, like the One Account.

george_jetson

InMyDreams wrote: »

Numberswise, I think it makes no difference. The difference is only on paper.

I think that's it - the only real difference is presentation. If I had a One Account I'd be a nervous wreck seeing my statement of X thousand pounds overdrawn, but with my money in different 'pots' I find it a lot easier to keep a handle on where I am.

bunking_off

You've hit the nail on the head, though george. The One Account is a marmite product...you'll love it or hate it. The "lightbulb moment" for those of us who love it is that it does indeed scare the pants of us seeing a statement (even at the cashpoint when taking cash out!!) of X tens of thousands pounds overdrawn. That does cause you to look at your finances in a different light and change your overall philosophy on life, not just on your mortgage approach (versus having a set of separate linked accounts tends to lull you into a false sense of security given you appear to have a credit when looking at your savings account in isolation).

It is inescapably expensive, but most people who like it have significant amounts of their balanced stoozed onto cards, and on the plus side the customer service really is excellent.

silvercar

the OneAccount is a marketing success, there are plenty of lenders with CAM (current account mortgages) that operate in the same way with lower interest rates and there are offset mortgages without current accounts (mortgage and separate savings accounts) that do similar without the heart attack balance enquiries.

First Direct brought out a CAM at 4.99% fixed for 5 years in February, so popular the offer is now withdrawn, but it illustrates the point that the OneAccount idea can be got at a much lower rate.

InMyDreams

bunking_off wrote: »

That does cause you to look at your finances in a different light and change your overall philosophy on life, not just on your mortgage approach (versus having a set of separate linked accounts tends to lull you into a false sense of security given you appear to have a credit when looking at your savings account in isolation).

I think this is really important and I know what you mean. We have been saving really hard in recent months/years to build up our mortgage pot. In my mind that is money earmarked for mortgage, but does also include other 'untouchable' money. That is our 'emergency' savings and the money we would otherwise have been putting aside for a skiing holiday next Feb. (Skiing was our passion before children but with three little ones just hasn't been feasible. Last Feb we did take them for the first time with my parents' help, but it was a one off...) By next Feb we will have overpaid by more than what the holiday should cost, but because we haven't kept that saving separate it will feel like we are doing it with borrowed rather than saved money. In effect, dipping further into our mortgage again. Which of course we are, in the same way as all the money we spend is really, with the mortgage debt hanging over us. So I can totally understand the argument for keeping it all in one pot. But like others have said, I just wouldn't be able to keep track of our budget if it was all in one place. My dad swears by it though.

jamesd

The One Account is a current account mortgage. That is, you can pay bills and salary out of and into the mortgage account directly. Current account mortgages are convenient when you have say 30-50% of the value of the mortgage going into and out of the account each month, as some small business people may. For others, offset mortgages are sufficient.

An offset mortgage is similar but the money goes into one or more savings accounts without the usual current account features.

Flexible mortgages without offset or current account features are OK and can be cheaper when the withdrawing of money is going to be less common, perhaps once a year.

The One Account is also distinguished by having an interest rate that is comparable to some competitive SVRs, not a good thing at all unless you'll clear the mortgage very quickly.

Here's a list of some more competitvely priced current account mortgages.

Claremac

Thanks so much to everyone for the input, particularly to jamesd for the link. I'm clearer now on the One Account. I don't think we could cope with having it all in one pot - we wouldn't be able to keep a control over our spending very easily. But I like the idea of the offset mortgage with separate accounts linked so will investigate this route further. Thanks again.