Offset mortgages 'could offer big savings'
Consumers who take out an offset mortgage could make substantial
savings over the term of their loan, one lender has claimed.
Research released by First Direct demonstrated that homeowners
could also reduce the length of their mortgage. In an example, the
company claimed that a £100,000, 25-year mortgage could be cut
by four years, making a saving of £24,232 on interest.
However, despite these benefits the survey revealed that 40 per
cent of consumers do not understand the advantages of switching to
an offset mortgage and a further 35 per cent said that they were
not sure how such loans worked.
Jimmy Kelly, head of mortgages at First Direct, commented: "It's a
real worry that consumers are not aware of the benefits of an
Offset mortgages work on the principle that the borrower sets his
or her savings against the value of the loan and agrees to lose all
interest payments on that amount in order to reduce the level of
debt on a property.
According to the Daily Mail's financial website, this can be
particularly advantageous in a low interest environment, where
savings are not performing well.