What House Price Hikes Mean To Your Offset Mortgage

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The media loves to report house prices rises and dips – it’s easy news and most people are affected by it – but what does it mean to an offset mortgage if house prices rise?

Prices fell heavy in 2008, but through most of 2009 they seem to have improved somewhat and that improvement seems like it is set to continue into 2010 – Halifax found that UK house prices were 1.1% higher in December than in December 2008 – the first annual rise since March 2008.

Prices rose by 1% in December compared with the previous month, marking the sixth consecutive monthly rise according to the bank – it says the average home is now worth £169,042. This number has risen by 9.4% – or £14,552 – from the trough of April 2009, the bottom of a 23% decline from August 2007.

So what does this mean for someone with an offset mortgage? Simply it means that your offset savings do even more. Consider this – an offset mortgage of £100,000 costs someone with £20,000 of savings the same as a mortgage of £80,000. But if another £14,552 has been wiped off the debt, it feels as though the offset borrower is paying off a mortgage of less than £66,000.

So for offset mortgage holders, hikes in house prices make their money work harder. It’s all about relative comparisons and the more equity you have in a home, the more your money does to reduce your monthly outgoings. While some people only enjoy increased equity as their house price increases, offset borrowers get a double whammy of cheaper rates and a smaller debt.

So talk to your mortgage broker about taking out a loan that offers more than most. Offset mortgages are the most innovative loans on the market and do more for their holders than any other home loan. So don’t delay, take advantage of house price rises today.

SOURCE: Halifax, 07/01/10

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