Our five year fixed rate expires shortly, we did well out of it for the first three years and less well for the latter two though in in all it was quite satisfactory.
We have some savings that earn half of nothing currently so I am thinking about an offset.
Any thoughts, experiences and/or recent good deals?
Last edited by: VxFan on Fri 11 Feb 11 at 00:16
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We did badly out of the fixed rate we got back in 2000/2001.... interest rates then came down. Did better on the tracker that followed and then the SVR was better still. But at least when we fixed the mortgage we knew where we stood for a few years and could afford it.
Doesn't your decision depend on how many years left to pay. Interest rates are going up and we all know this to be the case. And good fixed rate deals are disappearing - radio said some deals to be gone by next week. But trackers and SVR might be better for some. It depends on whether you have 5 years or 20 years of a mortgage to pay.
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Just seen the edit - with the offset bit in it.... could be an idea. We are earning sod all too on savings and have nothing to offset it against.
It is surprising how high mortgage rates have gone lately. With the 0.5% base rate. Which is which is why for some the SVR is better. We had this with C&G until the end of 2009. From when I first had the mortgage and until then the reduction was about £200pm.
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Buy nothing that you dont need Ched and pay as much as you can over and above the normal payments without incurring penalties.
Sooner or later interest rates will climb and i think drastically, and i dread the results for many.
That's no answer to your specific question i know, but a policy that worked for us..advised by my old school IFA as a general policy.
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>> and i dread the results for many.
Apart from savers/investors.
I too think interest rates are going a lot higher than they have for a long time. As a saver (trying) I'm not sure that is all good.
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Its tempting to use the savings to pay off a large part of the mortgage, on the otherhand it is nice to know that its is there for a rainy day, the offset offeres the best of both in that regard.
The MPC kept rates on hold again today. I am not sure about long term rates being excessively high though re fixed rates it is rather like futures, betting on a trend, in that regard the current fixed rates offered do seem to suggest that the lender believe rates will rise a little.
TBH the SVRs today are pretty good and there are some intros that mean a rate of well under 3%.
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Offsets are good if you have some debt other than the mortgage that you can include
It will depend on whether or not the type of debt you have can be wrapped in the offset if can include some debts other than the mortgage then the rate for those can be better, for example overdrafts/CCs linked to bank accounts with the same provider.
As always
Mark
Last edited by: Mark on Fri 11 Feb 11 at 00:18
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Doh..... timed out
That is at the point you set it up, if you can transfer debt into the motgage sum and balanced by savings
here
www.thisismoney.co.uk/mortgages-and-homes/tips-and-guides/article.html?in_article_id=394267&in_page_id=53957&in_advicepage_id=115
As always
Mark
Last edited by: Mark on Fri 11 Feb 11 at 00:25
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The only debt is the mortgage though rather than receive perhaps 0.5% on savings, by putting into an offset it will avoid paying, say, 2.99% on the same capital amount and therefore will work for us as well as be there if needed.
CC's are paid off, no overdraft, yes an offset could be an effective way of borrowing though that's a temptation to be avoided I think.
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Offset sounds like a good idea. Assume the savings plus short term payments to mortgage won't just clear it?
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When we were about to switch from the tracker to SVR the options for us were (a) do nothing or (b) pay £2000 and get a worse APR.... no brainer. Twelve months later we downsized thankfully (planned) and cleared the rest of the mortgage. But we're lucky to be able to downsize like this, needing now only 3 bedrooms.
Last edited by: rtj70 on Fri 11 Feb 11 at 00:20
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I had/have and offset - best way for me, meant I could pay as little or as it turned out as much as I wanted without any penalty - still got the "facility" although I'm in credit to the princely sum of £160.00 with them (One Account) means I have access to emergency funding at a decently low interest rate. My current situation highlights the value of it. I may have a small shortfall between the sales of property to move into my new one. I can fund this shortfall from money tied up in equity ISAs that have earned between 11 and 22% over the last two years or I can write a cheque from my facility for a five figure sum and pay 4% on the loan secured on a selling property and the bank get their money on release of the funds. A no brainer..
Offset for me any day of the week.
One Account are highly recommended from me - superb customer service from an UK call centre. Staff that know their onions especially in times of crisis.
Last edited by: Pugugly on Fri 11 Feb 11 at 08:24
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Look at theoneaccount. It's an offset and current account in one. You put all your money in it which reduces the mortgage but there are no fixed repayments so you are free to squash down the mortgage how you like. If you put in everything you have it means you're not paying x% interest on that amount which will far outweigh the taxed 0.5% interest you'd earn on savings. You are also free to dip into your savings up to your borrowing limit at any time too.
I don't know what rates they are quoting at the moment though. They used to be a tracker but conveniently when the rates dropped they decided they weren't which was a bit off.
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There's a misconception that mortgage debt is somehow respectable debt and different to any other.
I reckon that's something to do with being middle class, but that's for another thread.
Mortgage debt is different, but only because it's secured on your house and you will be made homeless if you cannot pay it back.
Being in debt and having savings is daft, you are paying to borrow your own money.
Pay off as much debt as you can, it doesn't matter how you do it, just do it.
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Iffy>>Mortgage debt is different, but only because it's secured on your house and you will be
>>made homeless if you cannot pay it back.
Actually that's not so. The moment you go into default on unsecured debt your lender can get it secured on your property anyway.
Iffy>>Being in debt and having savings is daft, you are paying to borrow your own money.
Agreed, up to a point. You do need *something* for a rainy day. And if you're married with children and potentially with health issues, you might want more savings. Remember, with an offset acocunt they have your cash and they have the right not to give it back to you if you no longer qualify for the mortgage. So there's no real point in an offset mortgage.
If you want to have "savings" separate from a "mortgage", then put it into a different bank so they have no chance to get their grubby mitts on it the moment it "rains" and you actually need it.
You pay a higher interest rate for the privilege of an offset mortgage.
Cheddar. Interest rates are going to go up. And nobody knows how much by, or when. I'd personally fix for as many years as possible. I'd rather pay 2-3% too much for the next five years than run the risk of having to pay an extra 10-15+% every year.
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MSE forum is best for this type of questions.
Just do market reasearch as much as possible for best deals (they change all the time).
>> Pay off as much debt as you can, it doesn't matter how you do it, just do it.
This is a sensible advice.
You should always pay off mortgage debt unless you have another investment option where you will be earning more than mortgage interest.
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But paying off vs savings are always done on a direct comparison of the savings rates - forgetting the rather significant point that savings interest is compounded whereas mortgage interest is not (if you keep paying it!). At the same rate, over a decent repayment time, it will pay to save the money and get the compound interest.....
Trouble with many mortgage deals at the moment is the hefty upfront costs - you need to add this in to any calcs you do. Mine is currently sitting at 1.49% variable so I'm not in danger of fronting up a four figure sum to fix at 3-4% just yet!
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>> But paying off vs savings are always done on a direct comparison of the savings
>> rates - forgetting the rather significant point that savings interest is compounded whereas mortgage interest
>> is not (if you keep paying it!). At the same rate, over a decent repayment
>> time, it will pay to save the money and get the compound interest.....
Most people forget the simple premise of how a mortgage lender survives in business. By charging more interest on loans, than on savings.
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>> with an offset acocunt they have your cash and they have the right not to
>> give it back to you if you no longer qualify for the mortgage. So there's
>> no real point in an offset mortgage.
>>
Really? That's a concern, what do you mean by "no longer qualify for the mortgage"?
Thanks.
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It means if you have a change of circumstances and tell the lender about it they may alter your available lending if for example your salary is reduced so that the multiple they've offered you is more than you'd be able to borrow now. Seems odd if they can do this as if you have a normal mortgage and your circumstances change they can't demand repayment of the difference.
If you keep paying then it shouldn't matter.
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...they can't demand repayment of the difference...
I think the lender will be covered because all loans/overdrafts are repayable on demand.
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A mortgage has a term though. It says 25 years or whatever when you take it out. You as the punter can pay it back early but the bank can't demand it back sooner otherwise they'd all be demanding money off everyone! Overdrafts can be demanded at any time.
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...but the bank can't demand it back sooner...
teabelly,
This seems to be a day for arguments, but I think you'll find they can.
I fully accept they will not provided you make the payments, but 'repayment on demand' is always there in the background if needed - it's the lender's nuclear deterrent.
What I say is definitely true of overdrafts and personal loans, it may be different when the loan is secured against a property, but I don't think so.
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Cheddar, exactly as I say. People bought flexible mortgages from sub-prime lenders (I mean the lender turned out to be sub-prime, not that the borrower was) and have since discovered they won't let them have the flexible amounts back despite paying the premium on the interest.
You will find that listed property companies "max out" on the debt they can get on their properties, whilst having cash separately on deposit elsewhere.
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Thanks all, I might look at the One Account though am thinking Barclays, I will have to ask them and look at the small print.
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Mortgage options - rtj70
