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Offset.

Scales

As savings interest rates remain at an all time low, Offset mortgages could be a solution for many of your customers.

WHAT IS AN OFFSET?

This type of mortgage allows customers to combine their savings and mortgage account enabling them to reduce their monthly payments or shorten the term of the mortgage.

The interest calculation is based on the total amount borrowed minus however much is held in the linked savings/bank account.

As with standard mortgages there is a range of fixed and variable rate Offset deals.

There’s a belief that Offset mortgages only benefit a certain type of customer – however Offset could suit a whole range of customers including those:

  • Who are remortgaging, next time buyers and first time buyers
  • With fluctuating cash flow due to self employment or with high bonus to salary ratio (eg. Saving for a tax bill)
  • Wanting to make overpayments
  • With excess funds in their current account at the end of each month
  • Who are higher rate tax payers
     

Scottish Widows have produced a document to help you address customers with strong growth in personal deposits.

They say that their 5 Year fixed rate remortgage offset could save a customer borrowing £400K with savings of £50K over £6K compared to top rates available for remortgage and savings.

Read the document in full here.

Plus their research entitled 'Earn Mortgage Rates on Your Clients Savings' can be seen here.

TOOLS TO HELP

Accords recent survey showed that 94% of brokers questioned believe that a better range of tools from lenders could help them to overcome customer misconceptions about Offset mortgages.

To make it easier for you here are the links to the Offset pages and Affordability Calculators from those lenders active in Offset.

ACCORD MORTGAGES  Offset Page and Affordability Calculator

BARCLAYS  Offset Page and Affordability Calculator

COVENTRY  Offset Page and Affordability Calculator

SCOTTISH WIDOWS  Offset Page and Affordability Calculator

MELTON  Offset Page

FAMILY BUILDING SOCIETY Buy to Let Offset Page and Affordability Calculator

With the tax changes facing landlords, here is a quote explaining why Buy to Let Offset works for your customer:

Keith Barber, director of business development at the Family Building Society, said: “Offsetting savings against your mortgage reduces the amount of interest charged. The effect of this, other aspects being unchanged, is to increase the profit from letting and increase the landlord’s overall net cash flow.

“With changes to the tax treatment of mortgage interest starting from 6 April, making best use of your resources has never been more important for landlords. This may be particularly important for retired investors relying on letting as part of their retirement income, for example.

“It’s also an ideal way for landlords to benefit from the regular sums they put aside for maintenance and improvements, or the tax to be paid on their letting income – something to be welcomed in this historically low interest period.”

 

OTHER RESEARCH ON OFFSET MORTGAGES YOU MAY FIND USEFUL

Money Facts Article Jan17

Which Article Jan17

Independent Article

Money Supermarket

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