Savings from Offset mortgages beats Cash ISAs
05 May 2010
** ‘Offsetters’ are up to £3,306 better off than cash ISA savers **
A study by first direct shows that over the last ten years typical cash ISA savers, who also hold a mortgage, would have been better off by placing their savings pot in a mortgage offset account. Based on average cash ISA rates and average mortgage rates* over the last ten years, if savers had tucked away their maximum cash ISA allowance into an offset account instead of a cash ISA, they would have been better off by £3,306.
The analysis shows that saving the maximum amount into cash ISAs since April 6th 2000 would now be worth £38,328. In contrast, someone placing the same sum into an offset mortgage would have saved £31,200, plus knocked an additional £10,434 off their mortgage, making a total saving of £41,634.
Richard Tolchard, senior mortgage product manager at first direct , commented: “For people without a mortgage or possibly nearing the end of their mortgage, cash ISAs are often the most efficient way to save cash. However for savers who hold a mortgage, this analysis show that cash savings work harder offsetting against a mortgage than they do within a tax efficient ISA.”
Average mortgage and cash ISA rates since 2000:
|
Year
|
Average mortgage rate
|
Average saving rate
|
|
2000
|
6.66
|
6.56
|
|
2001
|
5.84
|
5.45
|
|
2002
|
4.92
|
4.02
|
|
2003
|
4.62
|
3.60
|
|
2004
|
5.30
|
4.14
|
|
2005
|
5.35
|
4.47
|
|
2006
|
5.37
|
4.48
|
|
2007
|
6.24
|
5.11
|
|
2008
|
6.16
|
4.39
|
|
2009
|
3.94
|
0.56
|
Why is an offset more efficient than cash saving?
By offsetting your savings against your mortgage, you pay less interest on your mortgage and enjoy the flexibility of instant access to your money. As mortgage rates over the longer term tend to be higher than savings rates, your money is working harder.
-Ends-
For further information please contact:
James Thorpe (jamesthorpe@hsbc.com) on 020 7992 1433
or Amanda Brown (Amanda.brown@firstdirect.com) on 01132766700
Notes to editors:
· Average cash ISA rates and average mortgage rates source: Bank of England.
· The calculations are based on April 6th 2000 to April 5th 2010, they do not include any contributions in the current tax year.
The key features of first direct 's offset tracker mortgages are:
- financial benefit of offsetting any credit balances against the mortgage
- customers don't receive interest on their linked savings with an offset Mortgage, instead reducing the amount of interest on their borrowings, they don't have to pay tax on their savings
- availability to move the mortgage to a new property, as many times as they like without any product fees
- ability to redraw funds at the same rate throughout the term of the mortgage, back to the original mortgage limit
- minimum loan size is £30,000
- maximum loan size N/A
- the flexibility to make unlimited overpayments in either lump sums or regular payments
- a valuation fee will apply which is based on value of the property
- not available for "buy-to-let" or "right-to-buy" properties
- Available for both purchase and remortgage
Group.