There's nowt scary about the One account..Chocolate Balls there ain't Blog Discussion

Former_MSE_Andrea · 8 November 2005 at 12:34PM

This is a Chat Forum discussion on Martin's 'There's nothing scary about the One account.... Chocolate Balls there ain't' blog that you can read here.

mib · 8 November 2005 at 9:08PM

I note what you say about the one account but as a rate tart I find it great.
Ive off set £60,000 of my mortgage using 0% credit cards, saving myself a fortune in interest, which as a higher rate tax payer is even better. Great site by the way

big_ste · 9 November 2005 at 10:55AM

best offset account in my eyes is the yorkshire building society, 4.75% fixed for 5 yrs no need to switch current account, and i get valuation and solicitors fees payed!
Sounded so good i've switched from the stingey halifax who after my initial rate wanted 6.5%

mattb_3 · 9 November 2005 at 11:58AM

Martin says "There are very few people the One Account is any good for". I'd like to know who these people are, to check I'm one of them, as I have a One Account.

I'm with mib on this one, I'm also a rate tart and usually have anything from 20k - 70k in 0% cards which reduces the mortgage interest considerably. I also have variable income due to my job. Should I switch to a different account?

neil_mw · 9 November 2005 at 12:16PM

I'm a bit confused. Although this is a normal state of affairs for me, to some extent I feel justified this time!!

In Martin's blog he states "There are very few people the One Account is any good for", yet in the remortgaging guide he says "The concept is very clever and for many people proves worthwhile".

So, which is it?!! For me, the One account has proven invaluable. I can pay off a flexible amount of money every month, and don't have to choose or justify the amount. In addition, the fact that I'm permanently in debt means that I'm much less prone to spending money!! Things would be considerably different if I had a 'normal' mortgage, or one where you could 'choose' to overpay.

leofricfb · 9 November 2005 at 4:11PM

i have a oneaccount and though the interest is definately slightly higher than elsewherre, in real terms i can see my debt reducing very quickly and the interest i pay each month is also reducing to match!
Please could the people who manage to get £30k or more on 0% let me know how!

MSE_Martin · 9 November 2005 at 4:15PM

The first thing to say about the one account is it is hideously expensive. 5.75% you can easily cut 1% off a still keep a flexible mortgage. For every 1% you cut, you save around £1000 a year on per £100,000 of outstanding mortgage.

The second thing to calculate is this.

By going for the cheapest mortgage possible how much would you save on your genuine outstanding debts. Remember almost all modern mortgages allow overpayments, so you can still save.

Those who are offsetting - work out what you would be earning if the money you saved were in the top savings account (taxed obviously). If the saving on the better mortgage is greater than the lost interest you are doing well.

This doesn't mean its right for everyone. The problem isn't those sensibly using offset mortgages who have high lump sums and serious amounts of offset cash, the problem is for those who simply bought the marketing (every one i met during make me rich) and like the concept, who never use the facilities of an offset mortgage. That sadly is the majority of customers I suspect.

bunking_off · 9 November 2005 at 10:01PM

Sorry Martin,

I do believe you're right on many, many things. On this one, I think you may be right in theory. You may even be right in practical terms for the majority of One Account holders. However, for quite a few people who frequent this board (including myself) I don't think you are correct at all.

Like other posters, I've got £40k+ of my mortgage stoozed onto 0% deals. No farting about having to try to find a card that'll do a SBT and juggle accounts - I just balance transfer onto the One Account visa card and it automatically reduces my mortgage - equivalent of me earning 9.5% on my savings, risk free. Yes, you're right that 1% off the One Account rate would save me £1000 a month - my stooze pot is saving me £2500+ before I start on anything else.

The nature of my job means I have an awful lot of expenses to be claimed (almost to the level of my net salary) - I always get at least 3 weeks credit off my mortgage for that, as I phase the claim to be received well before I pay my credit card bill off.

My balance is approx £90K, but only two thirds of that is for the house itself - the rest is covering purchases that otherwise would have been on loans with far higher rates and less flexibility. I can just picture a bank manager's face if I walked in asking for £30k for a car, and no, I haven't made my mind up yet how long I'll pay it off over. My wife also wanted a car, but it worked out that we wanted to pay for over 5 years, the dealer was able to offer 0% finance, but only over 3 years - no problem, we treat it as a loan increasing at £100 a month for the first 3 years (differential between the payment for 3 yr repayment and 5 yr repayment), being paid off in years 4 - 5. Try explaining that to a bank to set such a deal up!

We'd been considering having kids so my wife would be taking a year off work. Oh dear, the notional amount I'd want to pay towards my mortgage wouldn't be viable on one salary. Not a problem, with a One Account I worked out that I could just let the debt roll up and take a couple of years extra to pay it off....without having to justify myself to any bank staff.

So far, I've knocked approx 12 years off my mortgage, with no great conscious effort.

And it's this "conscious effort" component which marks the difference between theory and practise. I don't doubt that if one got a lower rate mortgage, and overpaid it religiously with every spare penny, things would work out cheaper than the One Account. However, I struggle to believe that anyone actually does that in practical terms - they'll overpay a bit, but keep a bit aside "for a rainy day", thus losing out to the tune of the differential between deposit and mortgage rates (which for a 40% taxpayer like me, is very significant). Even worse, I bet many people will leave the "rainy day" money languishing in a current account so get no benefit from it.

Even if one did religiously overpay one's mortgage, what about the savings you get on a current account mortgage via your salary coming in at the beginning of the month but costs going out gradually over the month - that's another couple of grand average off my mortgage.

Yes, I know many mortgages allow you to overpay, but what if you decide next month that you've changed your mind and would really rather have that money back to buy a flash car or a house extension? The ability to go out and put it on Maestro without having to speak to some jumped up bank clerk is worth a few £k in my book...

As I say, I don't doubt you're right in your assertion for many people. I struggle in particular to see the benefit of offset mortgages - if you want flexibility go for a current account mortgage as you benefit automatically without having to put money into the savings component of the mortgage, don't want flexibility, go for a conventional mortgage. For me, however, and the people I know who exploit the concept of a One Account, I believe it works out a better deal than a conventional mortgage. I for one could never go back to the strait jacket of having to pay a fixed amount each month.

mattb_3 · 10 November 2005 at 1:05PM

Thanks to Martin for the clarification. When he refers to 'the majority of customers' who aren't getting the most out of their One Account, I suspect these aren't MSE people like me and bunking_off.

It's a tricky one.

When I went with Virgin One about 5 years ago, there didn't seem to be that many alternatives around, and I even accepted paying an early redemption penalty to leave my conventional mortgage. I really do think it's a good way to do your mortgage, giving you all the benefits that bunking_off refers to above (if you're clever about it). The only thing that bothers me slightly is the thought that other, similar accounts might have appeared, that offer exactly the same kind of mortgage and excellent flexibility, but have a lower interest rate.

Without spending a great deal of time researching all the options, I just don't know.

sykes_2 · 10 November 2005 at 1:36PM

bunking_off wrote:

I just balance transfer onto the One Account visa card and it automatically reduces my mortgage -

Before I say anything else, Bunkers - Can you confirm that you BT to the One a/c visa card, and it gets transferred automatically back to the a/c at no charge?
I'd looked at this some time ago, and when I phoned them they said they couldn't be at all sure this would work "in reverse" (am I right in my thinking that you refer to the Visa card attached to the a/c, where if you purchase with it, the purchases automatically get paid off every week by the account itself?) I've always thought this should work, but wasn't prepared to test it - not even with a couple of K BT!

I'd be VERY pleased to hear from you on this.

First post for me here.

A couple of things to say:

Martin - a great site, and one which I've followed for a long time. You are to be congratulated for all the work you do on it, and good luck to you if you get any rewards as a result of it - you deserve them.

Up until now, I've never been fired up enough to bother posting, but I've actually got off my behind and registered today, because, like some of the others on this thread, I feel that you've done the One Account an injustice.

Whilst I realise that it may not suit everyones' pocket or self-dicipline, there must be thousands of folk out there just like Bunkers, leofricfb and myself who are very pleased indeed with the product.
Martin - because your normal spoutings make so much down-to-earth sense, I'd hate to think that people who routinely trust your judgement and guidance, may dismiss this product out-of-hand because of your views on it. If anyone IS considering a one a/c mortgage, I'd certainly urge them to look very closely before turning it down.

I, too have mucho spondula stoozed onto 0% deals and the flexibility of the a/c makes it a breeze.
I'm a high-rate tax payer, and sometimes get bonuses and share deals etc with my work, so this type of a/c really works for me.
The fact that the rate you pay can be higher than elsewhere only serves to drive me harder and harder to dispense with the outstanding balance at every single opportunity (much to the chagrin of 'er indoors, whose ambition in life seems to be to keep the account balance figure as high as possible, using retail therapy in the form of regular "Shop-a-thons" as a tool for the aforementioned aim!!)

I'd also point out that the One A/c website is, I think generally well though out, and last but by no means least, on the occasions when I do phone them up, I find their staff nothing less than excellent to deal with - and coming from me that's saying something, I promise you!

The word on the street....
A final word on the account bill payments section - With both my partener and I having many similar cards to deal with each month, like all online banking sites, the payments section can be a bit of a mare to ensure you carefully pick out the correct card for the payment - particularly when you've set the payment up using the Bank's automated database where they only need the first few digits of the card no. and the sort code in order to set up the payee automatically. You normally have no input in how the mandate's "name" comes up on your browser, and is often just "MBNA 1234565" or similar, and if your household has several MBNA cards, then it can be time consuming picking out one from t'other.
What I've done in the past is to phone up, and use their database to extract the correct account no. etc etc first, then ask them to set it up as a third party payment instead, then giving the mandate a more meaningful name in the process.
They told me very recently that by the end of the month there should be changes to this, and you should have more flexibility on your browser to set up ALL mandates with whatever names you wish.

Please keep up the good work Martin, and well done to all the posters who, after all, help to make a site like this so good.

Best regards

Sykes

MSE_Martin · 10 November 2005 at 1:36PM

Bunking_Off. I don't think we're disagreeing at all. You're one of the people who it does benefit as noted by my calculation, but forumites are not mainstream people, most MSEs with this are wasting cash. Being the exception doesn't break the rule

I would say though that you can get an offset mortgage at 1% less than you're currently paying with Virgin, and would urge you to investigate (see sneakily get mortgage advice article). Also the remortgage guide has a lot more on current account mortgages that i've written

There's nowt scary about the One account..Chocolate Balls there ain't Blog Discussion

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