Many people see their home as their pension, and in the past that was fine – but now, in this new age of unreliable house prices and limited equity it’s time to think differently.

The Government recently revealed its proposals to change the mortgage market – it wants to ensure mortgages are safer, that people can afford them and that they are fair. But the Financial Services Authority, the regulator of the mortgage industry for the Government, says a new mortgage world means not using a home as an investment.

In its mortgage discussion paper, the FSA suggested that consumers should be re-educated “away from the idea of seeing property as an investment”.

This is true – you cannot rely on homes to carry on increasing in value as a means of guaranteeing a nest egg in old age – these past two years have proven that house prices can fall as quickly as they rise. But homes can be used as a savings vehicle instead of an investment.

By using your offset loan to build a nest egg alongside it, using a savings plan put together with a financial adviser, you reduce your rate each month and you save for another day. This lump sum can even be invested in an ISA, which offers savers big tax breaks.

No one should rely on their home as an investment – having savings as you get older is paramount, so you need to know they are there for when you need them. But using your home as a means to save is a great way of investing and reducing your outgoings. Talk to a mortgage adviser about using a mortgage debt to save for your future.

SOURCE: FSA, 19/10/09

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