Do you remember offset mortgages?

The best mortgage conceivable was the current account mortgage, but for some reason, people, even bank staff, failed to grasp how it worked, and eventually it was withdrawn. It saved us tons of interest and is what enabled us to start investing in rental properties. The offset mortgage is a poor second, but seems to be easier to understand.

I had one many years ago, circa 1992 with the only provider ( ' at that time ' known, ) with First Direct.
Don't know the current position.

Reply to the comment left by Morag at 30/12/2021 - 10:54
Agreed - we moved from our long standing OneAccount 2 years ago to a Barclays offset. OneAccount is now gone (sadly).

Not sure I see the benefits of a BTL offset - this only makes sense if your primary home is no longer mortgaged.

We use our offset mortgage as a our emergency cover + immediate cash purchase chest. If you are well behaved - it works a treat and bypasses the issues with lenders who become difficult (we have bought 2 houses the cash route after lenders got difficult - then re-mortgaged later once the lenders got themselves sorted out).

It's the same for buying cars - the seller wants to sell you a lovely loan with silly interest rates alongside the car - offset kills that off nicely.

The only downsides:
1) Higher rates vs other products.
2) You need to be very careful about who can access the savings/offset account - we use another layer of bank accounts so payments from the offset have to go through another bank account before it hits third parties...

I have recommended offsets to two other families who both say it has changed their financial lives!

Certainly something we should consider asking our mortgage brokers for, as it offers a better solution for those with properties still in their own name who are now subject to the full impact of Section 24.

Lower interest earned = lower taxable income
Mortgage interest no longer reduces taxable profit and in most cases landlords are building up unused interest due to 20% restriction

I still have many offset mortgage buy to let products from pre-2007 and think they are fantastic. What use to be The One Account one of the original and first products on the market is now run by RBS. Although the APR is 4.1% I dip in and out of it when I need to ... I see it as a big overdraft facility. Its great as you only pay interest on what you borrow. Others I have with Clydesdale Bank works slightly differently with a current account attached to the product. You pay the set interest each and every month but the balance in your current account offsets the interest applied to the loan so your loan balance decreases over time if your current account is in a positive balance. With an interest rate of Base + 1.05% its a product I will only redeem when the term expires !!!

Family B/S BTL Offset has only 2 deals at present of 3.14% discounted rate up to 60% LTV & 3.44% up to 70% LTV. Clydesdale also has a BTL Offset product that goes up to 75% LTV but on a Repayment basis only but it's highly unlikely you'll be able to raise the full 75% because of their affordability assessment. However, unless you are going to offset a large proportion of what you owe, it's not worth taking the Clydesdale or FBS deals as the Clydesdale Offset variable rate is 4.95% & FBS 3.14/3.44% versus much lower standard BTL rates elsewhere.

Reply to the comment left by Prakash Tanna at 30/12/2021 - 12:31
Yes Prakash, those were the same residential mortgages we had, and they were fantastic. Sadly withdrawn to new customers, and we couldn't take ours with us when we moved house as the new house and by now reduced retirement income didn't fit their criteria.

They operated as a huge overdraft secured on the property. Every penny paid in reduced the daily interest due, so we used it for everything business and personal. The interest saved, despite the higher rate was unbelievable, and the balance dropped rapidly, so we could dip into it again at any time for property deposits or anything else.

Reply to the comment left by Morag at 30/12/2021 - 12:57
I was fortunate enough to keep mines as buy to lets but they won't let me borrow more or extend the products beyond their expiry dates. They would prefer I re-mortgage for a new product and much higher rates which for me makes no sense. Fortunately they haven't tried to wriggle out of the deals and are honouring them till death do us part or the product expires! lol

I've still got 5 of em.

TMB
NRAM
One account (is still running, not taking new customers I believe)

They are great for buying houses cash as someone says above & re-mortgaging that cash one when u ready. And more often getting all your money back if u buy & plan right.
As others say above, got to be disciplined to pay straight back off so balance £0 as rates are normally more except Prakesh's great Clydesdale which I can remember getting close to one year, but for some reason din't go ahead.