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OFFSET dilema, what would you do?
Nice_guy
Posts: 124 Forumite
Hello everyone!
Having firmly decided on an offset mortgage I have narrowed the provider down to First Direct (was hooked on the one account originally, but have been very impressed with First Direct and the way you can manage your account). Their three main products they have are the following:-
Offset Base Rate Tracker
This product tracks the BoE base rate + 2.39% for the life of the loan, therefore it is currently at 2.89%. The fee for this product is £799 + £99 valuation fee. Total fees = £898
Fixed Rate Offset
Fixed for two years at 2.99%, then after this term it changes to the lenders SVR which is currently at 3.69%. This product has a £299 arrangement fee, £599 booking fee and £99 valuation fee. Total fees = £997
Variable Rate Offset
Lenders SVR which is 3.69% and an arrangement fee of £299.
I am currently swaying towards either of the first two options. With less than £100 between them in fees I don't think the fee difference is worthy of consideration. I suppose the question is do I go for a fixed rate or a variable rate?
Which one would you guys go for and why? I know nobody can answer the million dollar question of what will happen to interest rates, but what is your personal opinion? I think there is the need for interest rates to be 0% but on the other hand, how long will this be for? Then again some people think that the only way interest rates can move from here is upwards. Who knows!
SO ladies and gents, if this was your option, what would you do and why?
Thanks,
Nice_guy
Having firmly decided on an offset mortgage I have narrowed the provider down to First Direct (was hooked on the one account originally, but have been very impressed with First Direct and the way you can manage your account). Their three main products they have are the following:-
Offset Base Rate Tracker
This product tracks the BoE base rate + 2.39% for the life of the loan, therefore it is currently at 2.89%. The fee for this product is £799 + £99 valuation fee. Total fees = £898
Fixed Rate Offset
Fixed for two years at 2.99%, then after this term it changes to the lenders SVR which is currently at 3.69%. This product has a £299 arrangement fee, £599 booking fee and £99 valuation fee. Total fees = £997
Variable Rate Offset
Lenders SVR which is 3.69% and an arrangement fee of £299.
I am currently swaying towards either of the first two options. With less than £100 between them in fees I don't think the fee difference is worthy of consideration. I suppose the question is do I go for a fixed rate or a variable rate?
Which one would you guys go for and why? I know nobody can answer the million dollar question of what will happen to interest rates, but what is your personal opinion? I think there is the need for interest rates to be 0% but on the other hand, how long will this be for? Then again some people think that the only way interest rates can move from here is upwards. Who knows!
SO ladies and gents, if this was your option, what would you do and why?
Thanks,
Nice_guy
0
Comments
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What savings do you have that you wish to use as the offset, and how much do you need to borrow?"You were only supposed to blow the bl**dy doors off!!"0
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Hi
I am in a similar place to you - my opiniion (for what it is worth!)
Firstdirect rates seem really competitive and even better when coupled with the offset facility.
I have gone for the 2.89% offset variable on the basis that I think we are in for a really tough 2009 / 2010 and so cant see the base rate rising much (if at all). You can also come out of this deal easily if necessary.
I have specified a long term and interest only repayments to keep my contractual repayments low so that I can then overpay as much as I can into te offset accounts.
I did consider fixed rate 3.99% for 4 years but the flexibility of offset is important in our circumstances
all the best0 -
maninthestreet wrote: »What savings do you have that you wish to use as the offset, and how much do you need to borrow?
I have £40,000 in savings and which to borrow £113,000. We have a joint income of £5k going into the account per month and will be saving at least £2000 of that on a monthly basis.
Thank you!0 -
markandjayne wrote: »Hi
I am in a similar place to you - my opiniion (for what it is worth!)
Firstdirect rates seem really competitive and even better when coupled with the offset facility.
I have gone for the 2.89% offset variable on the basis that I think we are in for a really tough 2009 / 2010 and so cant see the base rate rising much (if at all). You can also come out of this deal easily if necessary.
I have specified a long term and interest only repayments to keep my contractual repayments low so that I can then overpay as much as I can into te offset accounts.
I did consider fixed rate 3.99% for 4 years but the flexibility of offset is important in our circumstances
all the best
I will also specifiy as long a term as poss and will be paying interest only and the remainder of the money going into the offset accounts. The thing I love about the first direct offset is that you get keep seperate accounts (linked pots) and the customer service seems really good. I love the thought about offsetting in general as you can get your cash back anytime you want, so you have effectively paid your mortgage without officially doing so, the flexibility is fantastic!0 -
Any help anyone?0
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i got the offset when it was 0.79 over base. and no fees at all. the 2.39 over base looks very expensive to me (in my opinion).
the fixed would probably be better as it is 2.99 fixed compared 2.89 which I think can only go up when the base rate starts going up.0 -
i got the offset when it was 0.79 over base. and no fees at all. the 2.39 over base looks very expensive to me (in my opinion).
the fixed would probably be better as it is 2.99 fixed compared 2.89 which I think can only go up when the base rate starts going up.
That sounds like a fantastic deal you got there Jiggy, shame there is nothing like that in the marketplace at the moment. When the BoE rate is as low as it currently is I think you would expect a higher % over base deals. I would think when you had your 0.79% deal the interest rates at the time were around 4-5% maybe.
I think you got a good point with the fixed rate, it is only 0.10 higher than than the base rate tracker. The fixed rate does have a redemption fee within the two year period tho. But can you grumble when you have a fixed rate for two years at 2.99, doesn,t sound bad does it.
Nice_guy0 -
With the BofE base rate at 0.5%, the tracker is unlikely to go down. When rates rise, 2.39% above base rate will be expensive.
Fixing for two years is pointless. The base rate is low and likely to remain low for much of that period.
IMHO, they are two relatively poor mortgage offers but if they are the choices, I'd go for the tracker providing there is no extended tie-in and no large exit fees.
For the record, my lifetime offset tracker is with Britannia and is currently 1.24%. The downside is that our savings (also £40K) are earning just 1.24%. I should be looking for somewhere else.
GGThere are 10 types of people in this world. Those who understand binary and those that don't.0 -
With level of saving and initial offset pot in a couple of years you will only have around £25k net(if you don't spend) so the rates rising will be less of an issue in terms of cost since on regular fixed deals the change fees will use up most of the savings unless they drop again.
If rates go up then the margins are likely to narrow so there may be a chance to change anyway.0
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