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Does anyone have any thoughts on offset mortgages in the following circumstances -

Yorkshire have a 5 yr offset fix for 4.09%. It also has a 5 yr normal fix for 3.94%.

Once we buy, we won't have any / much savings left until we gradually build up again. So the normal arguments for the advantages of offset over a normal mortgage don't hold very true for us.

However, we are thinking of putting an extra £60K onto the mortgage over and above what we need to buy the house, to enable us to do some improvements on the house in the future. Now, until we buy and settle into our new monthly mortgage payments, I'm not going to know for sure how comfortable we will be servicing the debt on all or part of that extra 60k. My thinking is, with a "net" offset mortgage with YBS, that we put the 60k into the offset savings account, such that we will only effectively pay interest on the "required loan level", but not the extra 60k (the capital repayment element at this stage of the mortgage will presumably be negligible). After 6 months or so, once we are settled into servicing the original loan, we can gradually start to use up the extra 60k at the original 4.09% interest level, and increase our monthly payments, if we so wish. Or, if not, prepay the 60k capital element.

So its like taking out a mortgage with an automatic "add on" facility up to 60k at the original interest rate.

Now that sounds great and flexible to me. But I'm not sure whether the cheaper debt costs of the 3.94% simple mortgage is going to make a real difference.

Would you go for the flexibility, or the simple cheapness? I'm well advanced into an application with Yorkshire, but now beginning to realise that HSBC has got much cheaper application fees; but no offset options ......

Edited by rex

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Agree that taking the extra £60k, then leaving it in the savings account to offset the loan makes sense. Will YBS allow you to do that? Probably can't stop you as wouldn't know that was your plan until you did it!

How quickly can you save a few grand to offset on top of that? It doesn't take much in the way of savings to make a 4.09% rate with offset better value than a 3.94% rate. Don't know how much principal you're talking and can't be bothered to do the maths anyway but it's going to be a fairly small sum I expect, if you can quickly save that then the 5 year fix with offset seems like a good idea*.

*if you absolutely MUST buy now that is ;)

Edit: typo

Edited by Voice of Reason

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Yorkshire have a 5 yr offset fix for 4.09%. It also has a 5 yr normal fix for 3.94%.

...

Now that sounds great and flexible to me. But I'm not sure whether the cheaper debt costs of the 3.94% simple mortgage is going to make a real difference.

Would you go for the flexibility, or the simple cheapness? I'm well advanced into an application with Yorkshire, but now beginning to realise that HSBC has got much cheaper application fees; but no offset options ......

The Coop has a life-time tracker at 1.99% above base (APR 2.5), no application feem and you can overpay whenever you want, interest calculated daily, and draw down the overpaid money any time you want, so effectively an offset mortgage, anad money wil be paid into your bank account on same day if requested before 2.00pm. Needs 25% deposit though.

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The Coop has a life-time tracker at 1.99% above base (APR 2.5), no application feem and you can overpay whenever you want, interest calculated daily, and draw down the overpaid money any time you want, so effectively an offset mortgage, anad money wil be paid into your bank account on same day if requested before 2.00pm. Needs 25% deposit though.

I think First Direct have a better offset deal at the moment.

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I think First Direct have a better offset deal at the moment.

Not quite, their best rate is 2.09% + BOE rate lifetime tracker for max 65% LTV, but it's still only £99 application fee (+ valuation fee). It was better back in August but they bumped the rates up a bit in September.

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thanks all. Got more than a 70% deposit. And really not interested in trackers. 5 yr fix minimum for us. I was even toying with Yorkshire's 10 yr fix of 4.99%, on basis that we can repay most of the debt by then ..... I don't much like the smell of the future landscape. Voice of R - yes, they'll let me take the mortgage and put it in the savings account (or, in opposite, using less of our equity for the house and taking more debt) - I think we may take a punt an do that, and save like mad afterwards .....

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thanks all. Got more than a 70% deposit. And really not interested in trackers. 5 yr fix minimum for us. I was even toying with Yorkshire's 10 yr fix of 4.99%, on basis that we can repay most of the debt by then ..... I don't much like the smell of the future landscape. Voice of R - yes, they'll let me take the mortgage and put it in the savings account (or, in opposite, using less of our equity for the house and taking more debt) - I think we may take a punt an do that, and save like mad afterwards .....

In case you come back on this one Rex...did you decide to go through with this?

Am I right in understanding that the only way you can pay money into the offset account is through their local branches so you can't have a salary wired into it?

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In case you come back on this one Rex...did you decide to go through with this?

Am I right in understanding that the only way you can pay money into the offset account is through their local branches so you can't have a salary wired into it?

Yes, we did go through with it. We have set up three savings accounts linked to the mortgage. You can operate them online so you don't have to go into a local branch. In fact, the savings accounts don't even have to be in your name - you could get dear old dad to link his savings account to your mortgage and, although he won't earn any interest on his savings, it will offset your mortgage so that you don't have to pay interest on the amount equivalent to his savings.

Not sure about salary being paid in. Personally I would have my salary paid into my main current account and then sweep amounts across to the savings accounts online. The Yorkshire BS offset is not a proper "current account" mortgage like some do - if you had a proper current account mortgage you could certainly have it set up so that your salary is paid directly into the acount.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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