Offset Mortgage Lenders

Offset Mortgage Lenders | A Market Overview

Red TapeThe first offset mortgage lenders in the UK were First Active with a simple offset mortgage and Virgin, with an offset product that has since come to be known as a current account mortgage. Since these initial offerings in the late 1990s, more and more offset mortgage providers have entered the market and there are now more than 30 offset mortgage lenders*. Indeed, research indicates that there are around 50 providers of flexible mortgages, though not all of these are offset mortgages. Even among offset mortgage lenders, the degree of flexibility varies.

Flexible features include overpayment, underpayment, early repayment and payment holidays, but not all borrowers make use of the flexibility offered by offset mortgage lenders. Research shows that relatively few people use underpayment and payment holidays, preferring to keep these as a safety net to be used as a last resort. However, many people are taking the chance to repay offset mortgage providers early. Some offset mortgage lenders say that borrowers can shave anywhere from two to eight years off a standard mortgage term****. Underpayments and payment holidays could increase the mortgage term and/or the total amount payable.

In the five years from 2000 to 2005, there was significant growth among current account mortgage lenders and offset mortgage providers. However, growth among offset mortgage lenders was significantly more than in the current account mortgage sector, with Datamonitor research (30/4/07) showing 77.2 per cent average annual growth.

The Right Mortgage For You ImageWhile many of the offset mortgage lenders entered the market with current account mortgage products, many of these have switched to offset mortgage deals instead, driven by consumer demand, and new entrants into the sector have also been offset mortgage lenders. One exception is the RBS One Account, which has remained a current account mortgage.

High Demand For Flexible Mortgage Deals

Demand for flexible mortgages has been boosted by low base rates. Together current account mortgages and the offset mortgage lenders sector were worth £29.2 billion in 2004 and is expected to reach £84.7 billion in gross advances by 2009. Indeed offset mortgage providers have outperformed the rest of the mortgage loan market, continuing to grow despite reductions in other parts of the sector. In 2005, there was additional growth, with £84.5 billion in new mortgage business. Datamonitor expects £130.2 billion in gross advances in 2010. It is anticipated that flexible mortgages will be 50 per cent of total mortgages by that time**.

Many of those (46.1 per cent) borrowing from offset mortgage lenders, according to recent research, earn above £40,000 a year***. Current advertising from offset mortgage lenders shows that their products are suitable for consolidators, people with variable income, self employed people, those who earn bonuses and those who save.

Offset mortgage lenders have become innovative with their product offerings, with a range of offset mortgages to suit nearly every borrower. Even first time buyers are not left out. Many offset mortgage lenders now offer family offset mortgages to help first time buyers get onto the property ladder. Offset mortgage providers are also offering a wider variety of mortgage rates, with combinations of fixed and tracker rates on many offset mortgage deals. With so many options to choose from, borrowers should always seek professional advice before choosing offset mortgage lenders. Specialist offset mortgage advisers are only a call way on 0845 60 33 173 and best of all the advice is Free.

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