Do lenders still offer offset mortgages? Why would you want one?
There are still a fair few lenders offering offset mortgages, although not as many as there used to be. Accord Mortgages, Barclays for Intermediaries, Coventry Building Society, Coutts, Clydesdale Bank, and Family Building Society are the biggest providers still issuing offsets.
Since Scottish Widows exited the offset mortgage market, smaller lenders have been able to attract more business. The bank pulled out, saying these mortgages were not profitable anymore.
Banks must put cash aside to ensure funds are available when customers want to withdraw, making it harder for them. They also make less money if the offset balance is reduced and monthly repayments are lowered significantly.
Aaron Strutt, product director at Trinity Financial, says: "We get a lot of requests for offset mortgages, and while they are popular with some borrowers, they are ultimately only worth taking if people put funds in the linked accounts. The available offset mortgage rates are usually more expensive than the standard mortgage deals.
"Borrowers use offsets for various reasons, including keeping cash for a rainy day, savings for school fees and funds for building work. Offsetting for tax purposes is also popular, especially for high-net-worth clients with chunky tax bills to pay as they can use lump sums to reduce the interest they pay on their mortgage until they have to pay HMRC.
"Interest-only offset is also popular because people can use their savings to pay off lump sums and significantly reduce their monthly mortgage costs while still accessing their cash."
Which lenders have pulled out of the offset market?
Scottish Widows is the bigger lender in recent times. It is fair to say offset mortgages have fallen out of favour with lenders, and as a result, there are surprisingly few providers offering them. In the offset heyday, lenders like Intelligent Finance, Virgin One, and Britannic Money spent a lot advertising their offset mortgages. These days, advertising is more rare.
Which lenders have good offset deals?
Accord Offset mortgages "include a linked Offset savings account, which they open for you with their parent company, Yorkshire Building Society (YBS). Your savings will be held with YBS, but Accord will act as trustee.
"This simply means we hold the account for your benefit. The accounts are kept separate, so you’ll always have access to your savings. This reduces the interest you pay on your mortgage by having some of your savings in an Offset savings account linked to your Offset mortgage. You’ll only be charged interest on the difference between the amount in your savings and the amount borrowed on your mortgage."
Coventry Offset mortgages: One Offset savings account is linked to the mortgage, and it can reduce the term or monthly repayments depending on the type of mortgage and switch between the two at any time. The idea is to have easy access to savings, and borrowers can potentially get additional funds (often known as a further advance) at the same rate, subject to eligibility, loan-to-value, and lending policy.
Call Trinity Financial on 020 7016 0790 to find out more about offset mortgages or book a consultation
The information contained within was correct at the time of publication but is subject to change
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