Brits offset mortgages as interest rates rise
Monday, 22 Jan 2007 12:32
Britons are getting around interest rate rises by switching to offset mortgages
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As interest rates climb, many Britons are getting around the increased mortgage costs by switching to offset mortgages.
Since the Bank of England increased interest rates for the first time in two years in August 2006, the popularity of offset mortgage deals has leapt by a third, research from Yorkshire Bank and Clydesdale Bank shows.
"In the last few months, we've seen more and more people considering offset mortgages," said Stephen Porter, senior marketing manager at Yorkshire Bank.
"People with these types of mortgages won't suffer as much in this climate of rising interest rates as they link homeowners' current, savings and mortgage accounts together.
"This means their savings rate will have a greater offsetting effect on their mortgages, helping them save thousands of pounds and knock years off their mortgage term compared to a standard 25-year mortgage."
But Britons could do far more to boost their finances in the wake of the Bank of England's actions, with savers missing out on £1.9 billion of interest.
Figures from Yorkshire and Clydesdale banks also show more than one Briton in five has no savings account.
And almost one worker in three admits they spend more than £100 a month on items they do not need.
"It's a sad state of affairs that Brits have let their personal finances get so out of shape," said Mr Porter.
"Many people will have vowed to quit smoking or cut back the Chardonnay in 2007 for the good of our health - but may be surprised how good it can be for their flabby finances, too."
Yorkshire Bank's top tips to get your finances in shape for 2007
Start the year with a new mortgage - Just one homeowner in six (17 per cent) is reviewing their mortgage arrangements after three Bank of England rate hikes, despite the potential to save hundreds if not thousands of pounds with a cheap mortgage deal.
Quit smoking - Yorkshire Bank calculates a 20-a-day smoker could save £1,820 a year by quitting.
Halve your alcohol intake - Heading out less often or drinking less when socialising would on average save £30.63 each week. This would save a couple £1,592.50 a year. That assumes men drink five less pints a week (or a bottle and two large glasses of wine) and women drink three and a half pints less (or a bottle and one small glass of wine).
Sort out your savings - More than one worker in five loses money everyday by not having a savings account. Overall, holding money in current accounts rather than in savings costs the UK £1.9 billion a year in interest, or £98.69 a year per person.
Keep a closer eye on your spending - Nearly one Briton in three (30 per cent) confesses to frittering away more than £100 a month on pointless items they simply do not need. That is over £1,200 a year, or £2,400 a couple.