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Scottish Widows Offset could be the answer for those with Personal Deposits?

03 February 2017

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What should mortgage brokers be doing to address strong growth in personal deposits? 

According to data recently released by the British Bankers' Association (BBA) the annual growth in personal deposits was 4.8% in November.  In the first eleven months of 2016 personal deposits grew by £32.4bn compared with £19.8bn in the same period of 2015.  

Despite the low returns available for these savings especially after the Bank of England's decision to lower interest rates to 0.25% in July, customers appear to be building up their cash reserves in a period of increased economic and political uncertainty. 

We also know that there has been a sharp increase in remortgaging activity in November.  According to the latest data from the BBA, remortgaging approvals were 14% higher last month than in November 2015 and in the first eleven months of 2016 were 13% higher than in the equivalent period of 2015. 

So how can mortgage brokers help clients looking to remortgage in this period of increased uncertainty? 

Scottish Widows Bank (SWB) has the answer with the launch of a competitively priced remortgage product range with the ability to offset the mortgage balance against the customer’s cash savings.  This means the customer pays interest only on the mortgage balance net of the balance in their SWB savings account and they have instant access to these savings if their situation changes. 

Traditionally the premium paid for the flexibility of offsetting meant that you needed quite high levels of cash deposits to beat the best rates available on the high street.  However with the new SWB remortgage range a customer taking a 2 year fix and borrowing £200k with £25k in an offset will be able to beat the leading non offset remortgage rates available even after taking into account what they could typically earn in interest on the £25k in an instant access account. 

With longer time periods and larger balances the savings increase.  The SWB 5 year fixed rate remortgage product could save a customer borrowing £400k with savings of £50k over £6k compared to top rates available for their remortgage and savings.  They could pay off their mortgage earlier with these savings or given the uncertain times we now live in they might choose to increase the level of protection they have in place for their family. 

Check out their Offset Page on their website here.

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