Make your savings work harder - 19th May 2009

Author: Jeni Browne Posted on: 19 May 2009

If you are a bit bored of seeing your hard earned savings earning the equivalent of tuppence in interest, then here is a mortgage which may well tickle your fancy.  Its not a new concept, but it is one which looks more attractive than ever... let me introduce offset mortgages to you.  Immediately, many will break out in a cold sweat at the propsect of having all of their banking, mortgage, savings loans and credit cards rolled into one because, well, its all just a bit complicated.  However the good news is that there are products out there which ensure you can get a good return from your savings from a very simple product, and...... actually thats it!

Basically you start off with a mortgage.   Lets keep this simple -  £100,000.  You then have a savings account with the same company (totally separate mind you, so you have a mortgage account, and a separate savings account) and lets pretend you are lucky enough to have £30,000 to put into your savings.  The money you have in your savings account will not earn any interest (hear me out, there is good news too!)  However, the £30,000 in your savings account is 'knocked off' your mortgage balance, meaning that you are only paying interest on a mortgage of  £70,000.  You have the option to enjoy a lower monthly payment, or keep your payments then same and in essence over pay on your mortgage, therefore paying it off quicker.

The interest rates on these deals are really good too, starting at 1.99% over base, or if trackers make you jumpy then there are also fixed rate deals up for grabs.  Therefore, technically if you took the tracker, your interest would be saving you 2.49% per month interest on the balance (and there's no tax to pay on the saving, like there would be on the interest you made - higher rate tax payers really should take note!)

Our offset page explains this all in more depth and with a market leading rate like the one mentinoed above offering the offset facility, it really is a stunning offering.

Author: Jeni Browne