With interest rates at historic lows over the last decade, high-street banks have had little to offer for those with large savings accounts. Although borrowing is very cheap, there is little financial gain to be had from keeping large savings in a mainstream bank account. However, there is a way to use your savings to the benefit of your property finance: an offset mortgage. But what are the best offset mortgages?
An offset mortgage allows you to link your mortgage to your savings. When you take out an offset mortgage, you’ll place some or all of your savings in an account linked to your mortgage. The interest payments on your mortgage are then calculated from the difference between your savings and mortgage. The higher your savings, the lower the interest repayments on your mortgage will be.
This can then help to reduce the cost of your mortgage in several different ways, depending on your priorities. On one hand, an offset mortgage could help you reduce your mortgage payments, as the interest saved in one month can then reduce the mortgage payments in the month after. Alternatively, you could keep your monthly payments the same, but pay off your mortgage sooner, as you will be paying down more of the capital.
What are the best offset mortgages available at the moment?
One lender we work with offers offset mortgages for loans up to £2million, at 75% loan to value (LTV). This is offered at a 2-year tracker rate, currently standing at 1.54%. This is an excellent offering.
If you’d prefer a fixed rate to give you certainty, there are also some good options on the market. This may be a preferable option, as there are hints of another Bank of England (BOE) Base Rate rise on the horizon. If you’re looking for a 2-year fixed rate, a lender we work closely with can currently offer loans up to £3million on a 2-year fixed rate of 1.97%.
We work with one lender who can offer offset mortgages up to £5million, at 75% LTV. This lender is currently offering a 2.14% fixed rate, available to a range of clients from first time buyers to clients looking to remortgage.
If a higher LTV is a priority, we also have an excellent relationship with a lender offering 80% LTV at a 2-year 2.84% variable rate, for loans over £1million.
Is an offset mortgage right for me?
Whilst they can be an excellent product for some, they’re not right for everybody. It’s not simply a case of finding the cheapest offset mortgages on the market: the best option for your will depend very much on your circumstances, so it’s always a good idea to speak to a broker for a thorough consultation.