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Mammon

Norther Rock Pull Offset Mortgages For Existing Borrowers

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I got a letter today from NR today. Saying they are withdrawing the offset facility from my BOE tracker mortgage. I have had the mortgage for 5 years now but have never actually setup the savings account with them as my spare money was always invested else where.

I think the plan must be that they want to force people with this type of mortgage to use the cash in the savings account to actually pay down the mortgage rather than offset.

This will probably allow them to lend the money out at higher leverage.

It will also obviously increase profits for them too.

Edited by Mammon

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I got a letter today from NR today. Saying they are withdrawing the offset facility from my BOE tracker mortgage. I have had the mortgage for 5 years now but have never actually setup the savings account with them as my spare money was always invested else where.

I think the plan must be that they want to force people with this type of mortgage to use the cash in the savings account to actually pay down the mortgage rather than offset.

This will probably allow them to lend the money out at higher leverage.

It will also obviously increase profits for them too.

Interesting. Wonder how this work in practice for those who do have money in the offset account?

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Interesting. Wonder how this work in practice for those who do have money in the offset account?

The linked savings account revert to having normal interest being paid on them, a crap 0.25% i think.

The interest rate on the mortgage remains the same.

Edited by Mammon

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I would suspect that the real reason is that an offset mortgage has a tax advantage. If you have a mortgage of 100,000 at 5% you pay 5,000 pa in ineterest. If you have 10000 on deposit at 5% yout get 500 pa in interst which is liable to tax. If you have a mortgage of 100,000 and an ofsett amount of 10,000 you pay 4,500 in interst and no tax liability. Given that the government own NR what do you expect?

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I got a letter today from NR today. Saying they are withdrawing the offset facility from my BOE tracker mortgage. I have had the mortgage for 5 years now but have never actually setup the savings account with them as my spare money was always invested else where.

I think the plan must be that they want to force people with this type of mortgage to use the cash in the savings account to actually pay down the mortgage rather than offset.

This will probably allow them to lend the money out at higher leverage.

It will also obviously increase profits for them too.

b***** h***! The offset is the best possible reason to buy a house! If they're changing the T&Cs retroactively, will they also cancel the original debt?

But as for higher leverage, what's the fractional reserve on a loan of £100k with an offset of £50k vs a single £50k loan?

[edit to add] I want to put my cash ISAs and as much cash float as possible into the offset account from the moment of taking out a mortgage! I've been told that was acceptable as recently as this spring.

Edited by porca misèria

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I've never understood the idea of these "offset" thingies.

If a bank want to offer people a flexible mortgage - where you can overpay and then re-borrow up to a set limit, why not just have one account?

Apply the interest to the balance at the end of each month.

We've got some "cheque book" mortgage accounts with Mortgage Trust and that's how they work.

You have a credit limit, and you can pay back and re-borrow as you want within that limit.

None of this messy business with having a "separate" savings account that somehow pays you the interest at the mortgage's debit rate.

I mean, if you have a loan (a mortgage) of £100,000 and then have £10, 000 to pay some of it off, well, why not just reduce the loan balance and have a £90,000 mortgage with a £100,000 limit?

Much simpler, and clarifies the position on paying tax on credit interest - you don't, because you don't earn any credit interest, you just pay less interest on the loan as it shrinks....

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You don't "have money" in a bank. You give the bank money, and they promise to pay you it back, and some interest (if you're lucky!).

How many times has banking been discussed to death on this site and still people don't seem to understand it.

Multiplier effects and all that other gibberish you are talking is irrelevant.

NR are simply pulling a product that isn't very profitable.

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I wonder if it has anything to do with this report on MSE

http://www.moneysavingexpert.com/news/recl...tm_campaign=box

Govt to stop banks dipping in to your bank account. If they can't dip into it then they don't want to have to pay you to have the facility

I will be keeping an eye on this. I noticed that buried in the small print of my intelligent finance T&Cs is that they claim to be able to pay off my mortgage with my savings without my agreement, so that money that I was saving up to buy a new car or whatever, is no longer there. Having spotted this I am in the porcess of moving all my spare money out of my offsetting accounts. It seems criminal that this term would not be made absolutely clear at the time I took it out.

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I've never understood the idea of these "offset" thingies.

Fine. So don't get one.

If a bank want to offer people a flexible mortgage - where you can overpay and then re-borrow up to a set limit, why not just have one account?

Apply the interest to the balance at the end of each month.

How many reasons do you want?

To start with, the one I mentioned earlier in this thread:

  • If I cash in my ISAs to fund a house purchase, the tax benefits are gone. That's for life, I can never get them back.

  • If I keep my cash ISAs, they earn currently SFA, while I'm paying more interest on a bigger mortgage. Assuming I can get a mortgage that big in the first place.

  • But by transferring the ISAs to my mortgage provider, I get to offset their value, while preserving the tax benefits for when the mortgage is paid off. Best of both worlds.

Does that help? Do you want to think about clarity over exactly what money is available to you, too? Etc?

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Are they just withdrawing it from your mortgage, because you haven't made use of it (similar to the banks recalling credit cards from people who don't use them), or is it a wider withdrawal of this type of mortgage?

Maybe it's just you?

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Are they just withdrawing it from your mortgage, because you haven't made use of it (similar to the banks recalling credit cards from people who don't use them), or is it a wider withdrawal of this type of mortgage?

Maybe it's just you?

No atleast one other person got the letter and they say they actually use it.

The letter was also addressed to Dear Customer(s) and not to me specifically.

http://www.rpoints.com/bb/viewtopic.php?p=1370224

Edited by Mammon

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Fine. So don't get one.

How many reasons do you want?

To start with, the one I mentioned earlier in this thread:

  • If I cash in my ISAs to fund a house purchase, the tax benefits are gone. That's for life, I can never get them back.

  • If I keep my cash ISAs, they earn currently SFA, while I'm paying more interest on a bigger mortgage. Assuming I can get a mortgage that big in the first place.

  • But by transferring the ISAs to my mortgage provider, I get to offset their value, while preserving the tax benefits for when the mortgage is paid off. Best of both worlds.

Does that help? Do you want to think about clarity over exactly what money is available to you, too? Etc?

I can see writs flying if any bank tries repaying a mortgage using a customer's offset ISA. That would be scary !

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