Offset mortgages increase in popularity
Posted by Manju in Business And Finance
According to the Council of Mortgage Lenders (CML), offset mortgages are growing in popularity. Figures suggest they accounted for around 7% of all new UK lending last year, equating to around 170,000 offset mortgages, or £29 billion in lending.
What is an Offset Mortgage?
Offset mortgages were first launched in the UK in 1994, and allow you to combine a savings account with your mortgage, in order to reduce interest payments. The lender calculates net borrowing by subtracting the savings balance from the mortgage and then charges interest on this reduced amount.
For example, if you had a £150,000 mortgage with savings of £20,000, you would only pay interest on £130,000.
They have the added advantage of allowing flexible repayments, and according to Yorkshire Bank, three in ten UK borrowers (around 4 million people) could benefit from an offset mortgage. They are, of course, not suitable for everyone, and I would recommend seeking professional advice from an independent mortgage broker or financial adviser to see if they are right for you.
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