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Save money - and reduce your mortgage commitment

2nd July 2013 Print

Savers with a mortgage who are finding returns on their cash have fallen are being reminded there is a simple way to make their nest egg work harder.

As new figures show Yorkshire Building Society has increased its market share for offset mortgages, the Society is encouraging more borrowers to consider this type of product.
The Yorkshire is the biggest High Street provider of offset mortgages and now accounts for 1 in 10 new offset products nationally.
Unusually among lenders, Yorkshire Building Society offers an offset version on all products across its wide range of competitive mortgages, usually priced at 0.2% higher than the non-offset equivalent mortgage.
Offset mortgages among the Yorkshire's current range include a two year fixed rate deal at 1.89% and a five year fixed rate deal at 2.64%. Each of these is available up to 65% LTV (loan to value).
"While mortgage rates are at their current historic lows we have been finding borrowers are keen to pay down debt where possible," said Yorkshire Building Society product manager Brendan Gilligan.
"All our mortgages allow for overpayment each year up to 10% of the loan amount without penalty, which is great if you have the money available and are able to tie it up in your mortgage.
"Offset gives you a similar benefit in terms of bringing down your monthly repayments, or reducing your mortgage term, but with the added flexibility of retaining instant access to your savings should you need them later.
"We have been providing offset mortgages for more than a decade but many people still think the product is complicated or they need a lot in savings to make a difference, when neither is true.
"Depositing as little as £50 per month in your offset savings account can add up to a significant cost saving on the mortgage and there is no limit on how much can be saved."
Offset mortgages work by offsetting a borrower's savings against the amount they own on their mortgage, so they only pay interest on the difference between the two.
This can be a tax-efficient way to save, as the borrower pays less interest on their mortgage when they offset, rather than earn interest on their savings, on which they would pay tax. As mortgage rates are generally higher than the return on a typical savings account, their savings work harder.
Borrowers have instant access to cash in their offset savings account without notice or penalty, which provides extra peace of mind for family members, such as parents or grandparents, who can harness their savings through the Yorkshire's Offset Plus option to help bring down their child or grandchild's mortgage costs.
Offset Plus, where a third party's savings are used to benefit the borrower, is available on any mortgage in the Yorkshire Building Society range.