Although the global economic crisis is over, we’re still feeling the backwash and trying to save money wherever possible.
A lot of homeowners are getting concerned about rising interest rates and the affect they will have on the monthly contractor mortgage repayments. More and more people are switching to fixed rate products and lenders have been quick to launch new deals.
However, there could be another option and its one that the majority of people don’t think about. An offset mortgage can save you thousands of pounds and yet only 7% of borrowers consider taking one out, according to recent research conducted by the Yorkshire Building Society.
A lot of UK mortgage lending companies don’t actually offer an offset facility so some consumers don’t get to hear about the benefits. For the uninitiated, it works like this. If you offset savings of £2,500 against a £100,000 mortgage, you would save £4,142 in interest costs and reduce your 25 year mortgage term by 7 months. The more savings you use to offset against a mortgage, the more interest you save and the shorter the mortgage term becomes.
Four or five years ago, an offset mortgage would cost you an extra one percentage point above the average mortgage interest rate. Now, you can find an offset deal from lenders such as Britannia or the Yorkshire Building Society at just 0.1% above the rate for a standard mortgage.
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