Offset mortgages better than savings

| March 17, 2009 | 0 Comments
Offset mortgages better than savings<br />

Savers looking to make the most of their money should consider offsetting savings against their mortgage, uSwitch.com said this week.

Offsetting savings against a mortgage can provide more lucrative returns in the current environment of low interest rates, the price comparison website claimed.

Research by the group found that nearly two million homeowners are thinking about offsetting their savings against their mortgage - a move that could save them £40,000 over 25 years.

“Unlike overpaying, offsetting allows customers to access their savings at any time,” said uSwitch.com personal finance product manager Louise Bond.

“For people that are nervous about the current financial situation, this could offer the most lucrative and safest alternative to a low rate savings account.”

However, uSwitch.com’s research found that 1.6 million people have no clue what an offset mortgage is, whilst nearly one million think that offset mortgages are too complicated.

Louise Bond believes these people should educate themselves financially, and take the plunge.

She said: “Despite popular belief, you do not have to have a high savings balance to benefit from offsetting.

“As long as you have a mortgage rate that is higher than your savings rate after tax, you will be quids in by offsetting for as little as one year.”

A homeowner with an average savings pot of £2,813 could save £221 from mortgage repayments, compared to £36 that they’d earn by putting the money in a 1.26% savings account.

In related news, homeowners on tracker mortgages recently saw their interest rates reduced to an average of 1.32% when the Bank of England cut the base rate to a record low of 0.5%.

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