First Direct promotes offset mortgages

Tuesday, 24 November 2009 12:00

First Direct is extolling the virtues of its offset mortgages as new research reveals 40 per cent of homeowners don't understand them.

The lender is concerned borrowers may be missing out the chance to save money and reduce the term of their mortgage by snubbing the product, which links customers' mortgages with their savings accounts.

Statistics from First Direct show swapping to an offset loan could cut the length of a £100,000 25-year mortgage by four years, saving £24,232 in interest payments over the lifetime.

Jimmy Kelly, First Direct's head of mortgages, said it was a real worry that people were not aware of the benefits.

He added: "Not many people know, for example, that our market-leading fee-free offset tracker would have the equivalent savings rate of 5.10 per cent for higher earners."

First Direct's offset mortgages allow customers to have six months to draw their mortgage down once a fixed-rate is booked. All accounts remain separate to help them keep on top of finances.

The lender also said there was no tax to pay on savings with its offset product. This was because customers' savings accounts reduced the amount of interest they paid on the borrowings.

In addition the product also provides borrowers with the ability to redraw funds at the same rate throughout the term of the mortgage, back to the original limit.

Customers can make unlimited overpayments and there are no early repayment charges on tracker rate offsets.

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