According to Barclays own data the average Woolwich offset mortgage stands at 132,000 and customers are keeping an average 21,000 in their savings and current account. By offsetting the savings against the mortgage customers are on track to pay off their mortgage around three years earlier.
To mark the 10th anniversary of offset, Woolwich mortgages is cutting the rate of its current offset deal by 40 basis points [from 3.49 per cent (base + 2.99) to 3.09 per cent (base + 2.59)].
Andy Gray, head of mortgages for Barclays said:
"Offset mortgages stimulated a new approach to the way people have borrowed money over the last 10 years, previously people treated a mortgage as a 25 year commitment, now people are knocking years off their mortgage, saving them masses in interest.
"It's not surprising that offsetting has caught on, the concept is brilliantly simple. People just manage their current account, savings and mortgage separately as they have always done and in the background all the components are added together every day, to save people interest and pay off their mortgage earlier.
"And the beauty is that these types of mortgages really benefit tax payers, whether you are paying 20, 40 or 50 per cent tax the equivalent gross rate of return on savings ranges from 3.61 to 5.78 per cent. Anyone paying tax will be keen to limit the impact of tax and inflation.
"Many customers with savings also want to keep them accessible rather than commit them to a long term bond or a traditional mortgage where you have to overpay, with offset the money is always on-hand but cutting the mortgage interest automatically."
Who offset could be suitable for:
- Anyone who has 5 per cent of their mortgage balance in savings
- Self employed people, who can ring-fence the money for their tax bills into the offset arrangement
- People who invest money in ISAs can offset the ISA money to the mortgage
- Tax payers, the more tax you pay the higher the benefit of offset. Money held in savings will get an effective interest rate of 3.61 per cent for basic rate tax payers and 4.82 per cent per cent for 40% tax payers and 5.78 % for 50% tax payers.
To find out more information about offset mortgages visit the website where an offset calculator is available to assess the savings that people can make. A vidcast is also available to view on the site explaining offset mortgages.
