The economic crunch is being felt by everyone regardless of where you live. The United Kingdom, like the United States; and other countries all over the world, the down turn in the economy has not left them unscathed. Under any other circumstances this could spell horror for anyone wishing to apply for a mortgage loan but this also provides a unique opportunity. Lending institutions are feeling the same crunch and hurt that we are. Let us face the facts that if we are not borrowing they are not lending. This means they are staring down a loss in interest rate revenues. What this means for us are some very good deals.
Normally I wouldn’t personally advocate for a lender because I think its better to be unbiased. With this being said I cannot help but to recommend First Direct because at this point in time they have one of, if not the best rates currently published on the Internet or in print.
First Direct specializes in offset mortgage loans and, like I said, their rates are currently the best thing going. They have several products available for you and even better deals if you happen to be a new customer!
Once you look over these numbers you will be as thrilled as I am and will be hurrying to phone them! You can call them on 08 456 100 100
What is an Offset Mortgage Anyway
Like most people this financial stuff is all Greek to me. Unless you are banking professional you may not have a clue as to what this stuff means. I have done a lot of research and I hope my explanation helps you make an informed decision.
The Basics
An easy explanation is that this kind of mortgage reduces the interest you pay by using an existing balance of credit (your savings) against the debt of the mortgage. If your mortgage balance is £200,000 for example and you have some savings in the bank of say £50,000 then you are only charged the interest of £150,000 which saves you money. Many lenders will setup a limit of credit with the mortgage so that as a borrower you can redraw up to this limit. It is subject to review of course. Different lenders handle these accounts in various ways.
Tax Advantage
You may see advertisements for the Offset Mortgage being called tax efficient or a savings. When you earn interest for your deposited accounts it is considered to be income. Due to this distinction it is taxed at the source. The Offset Mortgage is a little bit different because the credit balance does not create income because it, in fact, saves mortgage interest which would have been charged previously. Since there is no payment on interest made you cannot be taxed on it.
Fighting for Your Business
Many lending companies are offering offset mortgages and they will do what they can to win your business. They will add features to the loan or vary the basic concept of the offset mortgage loan. Some lenders will offer the loan in an “interest only” schedule of payments and offer full month offsets on the interest. What this means is that you are charged interest on the balance less your deposits and savings. So you will be paying less interest each month.
One other variant you may commonly come into contact with is where you pay off the capital of the loan as well as the interest. This is like repaying a normal like if the offset variant didn’t exist. The interest that is finally charged to the mortgage is less because of the offset arrangement. You will basically be overpaying your loan and paying it off early.
Current Base Rates
The current base rate offset tracker program is being based on the Bank of England’s current base rate + there own % for the entire term of the loan. At the moment this is 2.89% but this can fluctuate quite rapidly. The overall comparison cost is currently 3.0% APR with an arrangement fee of under £800 and there is no booking fee.
Fixed Rates – Tracker Mortgage
One loan product that is available is a fixed rate offset mortgage. The initial rate is set at 2.99% and is fixed over a 2 year period. The current variable rate is set at 3.69% with a £299 arrangement fee. This loan product does have a booking fee of £599 currently. This is available for loans of £30,000 and up but the booking and arrangement fees will be added to any loan up to £400,000 and for every £400,000 afterward. With this loan it is important to note that if the rate decides to fall you may wind up paying more for your mortgage during the period of the loan that is at the fixed rate. This is, of course, more than you would pay with a variable rate loan. First Direct does charge a fee if you plan to repay the balance of the loan early.
Variable Rates – Tracker Mortgage
Unlike the fixed rate mortgage a variable rate is in a state of constant flux. This can be good or bad for you as the consumer. When your loan is fixed you will know how much you are paying each month without fail. If you have a variable rate this means that your payments can change, for the good or the bad, each month based on the current interest rate.
At the moment First Direct is offering a loan, based on a loan of £30,000 or more, at a 3.8% APR overall. There is no booking fee but there is arrangement fee of £299.
Life Tracker Mortgage & Repayment
This type of financing is available on loans of £10,000 and up with a £999 arrangement fee. The booking fee is waived with this type of loan. The overall APR is 3.2% based off the current Bank of England’s base rate (for the course of the mortgage) which then averages out to 3.09%.
When you are looking at this type of loan please think about it carefully. Securing your other bills on your own is risky business. If you don’t continue to make payments on the loan there is always the possibility of your home being repossessed by the lender.
