Consider the Offset Option

by Mark Johnston

With record low Bank of England base rates at the moment and savings accounts offerings menial interest, it makes sense to consider the offset mortgage opportunities out there to reduce the debt associated with your mortgage. 

Currently there are only 7 per cent of borrowers who take advantage of the offset option, it’s a surprise that this number isn’t much higher.

While consumers are switching their utilities and keeping their credit cards moving for a couple hundred benefits every year but are neglecting to consider substantial savings into the thousands by switching to an offset mortgage.

The down side to keeping your savings separate from your mortgage.  For one thing, savings interest is barely above the record low point of a few years ago, so your money isn’t working very hard and very little interest will be made.  The next point to note is that you have to pay tax on your savings. 

The reason that the figures for offset mortgages are quite low is because many banks and building societies don’t offer offset options or facilities.  This means that borrowers don’t know about the offset option and are not aware of their advantages.

The offset products are neither complex nor restricted to borrowers with large savings at hand. 

A year ago, if you wanted to offset your mortgage you would have been subjected to an additional 1 per cent interest on your mortgage. Today, if you wish to offset your home loan, you would only be subject to a 0.36 per cent increase on your loan rate.  Some lenders, like Yorkshire Building Society are only putting an extra 0.1 per cent on your borrowing interest rate.

Yorkshire Building Society has something of a reputation when it comes to taking over it’s smaller rivals.  Last year, Chelsea was absorbed into the group in a high profile take over that lead to the Yorkshire taking on their exposure of £41 million worth of mortgage fraud within its risky buy to let sector.

2008 saw the Yorkshire take in the Barnsley Building Society after she failed under the losses associated with the collapse of some Icelandic banks and their faulted deposits.

With the merger of Chelsea and Yorkshire Building Society, and the innate strength within the organisation, they have a total asset base worth £30.1 billion for 2011.  With growth averaging at about 30 per cent year on year they are definitely a company to take into consideration for the future.  The Yorkshires pre tax profits for 2010 were £115.4 million, up from their financial year in 2009 when they reported a loss of about £12.5 million.

In 2009, the Yorkshire had a gross mortgage lending book of £939 million, quite impressive but nothing compared their 2010 figures when they tripled the book to £2.9 billion.  Based on their strong management and a policy of prudent lending, the Yorkshire has been able to grow and grow responsibly.

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