In recession times, savers can still find a ray of hope in Offset Mortgage which can offer the equivalent of 5% interest of non-offset mortgage. With a cut in interest rates this week, many savers are wondering about what to do with their money.
If you are among those who have a mortgage debt, an offset mortgage can be the best option for you. An offset mortgage is one where savings are set against mortgage debt when interest is calculated. The gap between offset and non-offset mortgage is now closing said David Hollingworth, at mortgage broker London & Country.
In an offset mortgage the money is set against your debt and you can withdraw the amount any time you wish to. On the other hand in a non-offset mortgage you are unable to get the money without remortgaging.
First Direct of HSBC introduced a market-leading offset mortgage at 2.99pc which is fixed for two years before shifting to standard variable rate of First Direct which is currently 3.69pc. If you a maximum of 75pc loan to value and fees of £898 you can avail this mortgage.
However, offset mortgages are not meant for everyone. The deal that First Direct is offering can be availed by only people with 25pc equity or more. Mortgage specialist of Savills Private Finance, Melanie Bien said the popularity of offset mortgages has increased over the years since borrowers enjoy the flexibility of access to their savings. But before choosing an offset mortgage ensure that you have enough savings as rates are higher than residential deals.