Understanding offset mortgages with first direct

Forty per cent of homeowners don't understand the basic idea of an offset mortgage and a further 35% only roughly know how they work, according to a survey commissioned by first direct.

This worrying trend highlights how consumers may be missing out on saving money and reducing the term of their mortgage with just two in ten (21 per cent) seeing offsets as a way they can save money on their mortgage.

Findings from first direct show that swapping to an offset mortgage could cut down the length of a £100,000, 25 year mortgage by four years and save £24,232 in interest payments over the lifetime of the mortgage.

first direct's Head of Mortgages, Jimmy Kelly, said: "It's a real worry that consumers are not aware of the benefits of an offset mortgage.

"Not many people know, for example, that our market leading fee free offset tracker would have the equivalent savings rate of 5.10% for higher earners."

Benefits of an offset mortgage with first direct

Once a fixed rate is booked customers have six months to draw their mortgage down all accounts remain separate making it easier to keep on top of their finances.

Customers don't receive interest on their linked savings with an offset mortgage, instead reducing the amount of interest on their borrowings, therefore, there is no tax to pay on the savings.

Ability to redraw funds at the same rate throughout the term of the mortgage, back to the original mortgage limit.
 
Flexibility to make unlimited overpayments in either lump sums or regular payments.
 
No early repayment charges apply on tracker rate offset mortgages.
 
Ability to move the mortgage to a new property without any new mortgage fees.

For more information, visit firstdirect.com.