Why Offset Mortgage Best Deals Are Not Always What They Seem

When potential homeowners are searching for a mortgage, for example on a comparison website, they will usually look for the offset mortgage best deals. But the offset mortgage best deals may not always be what they seem. They may also end up costing borrowers more than they think over a 25 year mortgage term. To test the theory, we did a search on a well known financial comparison site for the offset mortgage best deals for a homebuyer wanting to borrow £90,000 over 25 years*.

When the initial rate was considered the offset mortgage best deals search found six deals from two financial institutions. There were three offset mortgage deals from Egg at discounts off the Bank of England base rate of between 0.0 per cent and 0.89 per cent for periods of two year. The other three offset mortgage best deals came from Standard Life Bank, with deals of 0.45 per cent to 0.97 per cent for a year. Among the offset mortgage best deals, the amount to be repaid varied considerably, from £162,291 at the bottom end to £174,064 at the top, based on the true cost of the offset mortgage during the 25 year term.

However, the offset mortgage best deals change completely when sorted by annual percentage rate (APR), the overall cost for comparison. In this offset mortgage best deals search, Scottish Widows for professionals comes out top of the table with a 6.8 per cent APR discount variable offset mortgage. At 7.3 per cent APR, there are variable rate offset mortgage deals from Intelligent Finance, and at 6.6 per cent APR there are variable rate mortgage offset deals from Coventry Building Society. Repayments among these offset mortgage best deals vary from £183,710 to £194,672 based on the real cost of repaying the offset mortgage during the chosen period.

Offset Mortgage Features

The offset mortgage best deals change again when portability, the ability to overpay and underpay and the lack of extended early repayment charges are factored in. The six offset mortgage best deals include four tracker offset mortgages from Scottish Widows and one variable rate offset from Royal Bank Of Scotland One Account. APRs are between 6.5 per cent and 7.8 per cent, with total amount repayable between £183,710 and £200,084. Again, looking at the offset mortgage best deals sorted by true cost changes the offset mortgage lenders in the frame, with Scottish Widows and Accord. Remember underpayments and payment holidays could increase the mortgage term and/or the total amount payable.

What this illustrates is that the offset mortgage best deals vary depending on the features that particular people are looking for. The offset mortgage best deals for some people will be those that feature the lowest initial rate and the most flexible early repayment scheme. Other borrowers will be more interested in long term value, so the APR and the actual amount they will have to repay will be more interesting. This is why it's best to talk to a specialist mortgage advisor when searching for offset mortgage best deals.

The information in this article is for illustrative purposes only. Should you wish to find out more about the mortgages currently available from our whole of market panel of lenders please contact an advisor on 0845
60 33 173. A personalised illustration is available on request.

However, please note that The Offset Mortgage Centre cannot advise on or arrange mortgages from the Leek Building Society, Yorkshire Building Society, Hinckley Building Society and the Britannia Building Society or Egg.

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© 2007 and 2008 Offset Mortgage Centre | Terms and Conditions | Privacy Statement | We don't charge a fee for admistration of an offset mortgage. The Offset Mortgage Centre is the trading name of The Mortgage Broker Ltd, (a whole of market mortgage broker), which is an appointed representative of Home of Choice Limited, which is authorised and regulated by the Financial Services Authority | Your home may be repossessed if you do not keep up repayments on your mortgage. *Source: Trigold 14/1/08.