first direct launches offset mortgage with 2.99% fixed rate

04 March 2009 / by Rachel Mason
first direct, part of HSBC, has launched a new market leading offset mortgage deal.

The offset mortgage – which works by setting savings against mortgage debt with the aim of offering the borrower substantial savings or the chance of paying off the mortgage sooner – has a fixed rate of 2.99 per cent for two years.

After the fixed period, the rate reverts back to first direct's standard variable rate, which is currently 3.69 per cent.

The offset mortgage deal is available to new and existing customers for either house purchase or remortgage.

"This product is a market leader and we think it will be very popular particularly as our customers are extremely savvy when it comes to knowing how to make the most of their money," said Jimmy Kelly, first direct's mortgage manager.

"More and more are understanding the huge benefits of offsetting their mortgage," he said.

More than 10 per cent of first direct's customers now have an offset mortgage, says the bank, which allows them to make use of the financial benefits of linking day-to-day savings to their current account balances and mortgage.

"Customers would need to receive an interest rate equivalent to 3.80 per cent AER on their savings account for a 20 per cent taxpayer and 5.10 per cent or a 40 per cent taxpayer for them to achieve the same benefit as offsetting any credit balances they have against their mortgage," said first direct.

In fact, offset mortgages are likely to become more and more popular, say industry experts, due to the fact that interest rates are so low.

While savers are getting next to nothing on their investments, by switching to an offset, they could get the equivalent of five per cent interest.

Melanie Bien, a mortgage specialist at Savills Private Finance told the Telegraph: "The popularity of offsets has soared in recent years as borrowers like the flexibility of retaining access to their savings while at the same time benefiting from paying less interest on their mortgage. It can be the ultimate in flexibility."

While David Hollingworth, at mortgage broker London & Country said that the gap between offset and non offset mortgages has been closing for some time and that the best offset mortgages "now look very competitive."

Interested in finding out more about offset mortgages? Compare offset mortgage deals and get mortgage quotes.

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