The decline of offset mortgages

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If you would like to use your savings to offset the balance of your mortgage, an offset mortgage could be the right product for you. An offset mortgage allows you to reduce the size of your mortgage and reduce your monthly payments, as your lender will take into account any savings you also hold with them.

However, despite the benefits of an offset mortgage latest research by Moneyfacts has shown that the number of offset products has hit a five-year low.

At present there are just over 230 offset mortgage products available. This is the lowest figure since 2010 when there were only 210 available. Last year there were 370 available, so in just one year there has been a dramatic fall. There are many people hoping to find a good offset mortgage, and hoping for lots of choice in terms of the products available, so these people will most likely be disappointed.

Part of the reason for this decline is the poor performance of the savings market in the last few years. But there is some good news as the mortgage rates on offer are presently at record low levels. So even though there are less products on the market, they are available at the lowest ever rates.

The number of offset mortgage products available could fall even further over the next year as the savings market still hasn’t bounced back. This is a shame as the idea of being able to reduce the interest paid on a mortgage whilst having access to a savings pot is very appealing to many people.

The new personal savings allowance is coming into effect in April and this could make offset mortgages redundant for many people, especially if they opted for this product due to tax efficiency. Under the new rules, savers can earn £1,000 tax-free; and so may find that their savings are better being kept elsewhere.

Given that mortgage rates are currently low, there are lots of competitive deals to choose from. At present, the lowest 2-year fixed rate mortgage is just 1.15% and so in the long run, it might not be worth paying the premium for an offset mortgage.

Offset mortgages will steadily diminish, and mortgages will steadily become more rigid so we are heading for a very different market.

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.

We do not charge for the initial consultation but there may be an administration fee payable when an application is submitted, this fee is usually £195 and we are also paid commission from the lender. Alternatively you could receive the commission from the lender and pay us a fee of an estimated £995.00.

If you would like to discuss offset mortgages with the experts, talk to Derngate Wealth today.

March 15, 2016Danny PerryBlog

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