If you have savings an offset mortgage could save you money
Wednesday 4 September, 2019
Some financial institutions are reducing their interest rates due to Brexit uncertainty so good mortgage deals are available. With savings accounts paying low rates of interest you might save money by combining your mortgage and savings in an offset mortgage. Call our mortgage brokers today on 01707 872000 to find out if this mortgage is right for you.
With Brexit looming ever closer and no resolution of a deal apparent even with a new prime minister, there looks to be interesting times ahead in the financial industry. Now the media will focus on the doom and gloom and comment on the uncertain times ahead but there is some good news to come out of this.
Some mortgage rates have reduced due to Brexit uncertainty
Many financial experts who thought the Bank of England would raise interest rates have come to the conclusion that actually the Bank of England could reduce interest rates or at the very least interest rates may remain the same. This is because of the uncertainty and short-term dip in the economy we could experience because of Brexit. Consequently, the government will want to stimulate growth and not compound these factors which could lead to a fall in the Bank of England base rate. Many financial institutions have already reduced their interest rates making mortgages even cheaper.
As some financial institutions reduce interest rates is it the right time to buy a property?
Errol Hall, Mortgage Broker in Cricklewood, North London and Hertfordshire said: ‘It could be a good time to get on the property ladder with stable house prices and relatively cheap financing. To give you an example you can now apply for a 2-year fixed rate mortgage and pay under 2% with a 10% deposit, which is an excellent mortgage deal and suitable for some clients. This is a mortgage I could never believe was possible when I first started my financial services career over 5 years ago.’
Errol Hall, Mortgage Broker in Cricklewood, North London and Hertfordshire continued: ‘One element of mortgages which clients have asked about recently is offset mortgages. With interest rates falling the interest you will receive on savings which is already low could reduce even further resulting in you actually losing money when you take into account inflation. Therefore, an offset mortgage may benefit you as the interest you pay on any money you borrow for example your mortgage, is higher than the interest you earn on the money you save. With an offset mortgage whatever money you have linked to your mortgage account is money you will not have to pay interest on.’
Offset Mortgage Case Study
If you have savings this product may save you money…
If you have a £300,000 offset mortgage and have £50,000 savings in the linked mortgage account, you will only be paying mortgage interest on £250,000. Now what is better, holding that £50,000 in a savings account that generates 0.5% interest that is taxable or holding it in an offset mortgage account that means you don’t have to pay 1.5% mortgage interest on £50,000 of your mortgage that is not taxable.
‘Overall offset mortgages are an interesting option that should become more popular as they provide a flexible way to manage your mortgage economically. It is great for clients who have large bonuses, sole traders and individuals that need to have cash available to pay for example tax bills, gift money to children for deposits and university fees. With an offset mortgage you can still save money while keeping your savings available if you need them which is better than putting money into a savings account with a low rate which could be eroded by inflation. Offset mortgages are more complicated than a normal mortgage so I would always recommend speaking to a mortgage adviser to see if the offset mortgage product is right for you.
At Thomas Oliver we can show you worked examples depending on different level of savings so you can see what you could save by switching to one of these offset mortgage products.’
‘Our mortgage broking team will show you how you can reduce your mortgage term or monthly mortgage payments based on different amounts you deposit in the linked offset account. If you are interested in an offset mortgage or would like one of our mortgage broking team to discuss suitable mortgage products for you please get in touch on 01707 872000.’
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.