First Direct hails offset mortgages

Tuesday, 19 May 2009 12:00

Borrowers could save thousands of pounds by switching to an offset mortgage, new research by First Direct has revealed.

A study from the lender showed taking out the mortgage, which is linked to savings or a current account, could cut the length of a 25-year £100,000 mortgage by almost three years.

And this would save the borrower £18,322 in interest payments over the lifetime of the mortgage, according to First Direct.

Offset mortgages work by taking the interest earned on a savings account, for example, and using it to reduce the balance of their mortgage.

But almost half the people questioned by First Direct said they did not understand the principle of offsetting and even more could not see the benefits.

However, in the past three years 400,000 new offset mortgages had been issued, suggesting numbers of people using them was increasing, said First Direct.

Jimmy Kelly, a spokesman for the firm, said: "More and more savvy savers are starting to see their potential, helping them make the most of their savings pot, and forcing their money to work much harder."

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