I WOULD STEER CLEAR OF ABBEY AND SANTANDER
m ten years ahead with my mortgage from abbey, i pay 3 times my monthly payment too, imagine my dismay getting a letter telling me im £365 behind, because i pay more each month eg £1000 they sent me an arrears letter,
i have £17k spare so paid the lot off, never take out money with santander , abbey or any other of its alternative names,
Cant wait for tesco bank, or virgin or considering bank of china for a new house loan,
all that money wasted on formula 1 racing advertising......F1 now stands for like the PC f1 return ? NOT ON YOUR LIFE,

excellent reply, well appreciated , thanks

Hi Dave,

Yes, you could pay 50K off reducing your mortgage to 106K and then having 50K in the offset, but you would need to check that you are allowed to make overpayments greater than 10% per year as this is usually restricted during a fixed term (or perhaps with a penalty). See below about having the money in the offset and having a mortgage (if it all went wrong).

Check out the FSCS site for more info on the protection, but my understanding is that if anything happened, the money that you owed the bank would be deducted before you are given compensation.

So the offset would be used to reduce your mortgage and you would receive no compensation, but in effect you would be no worse off.

In the case of having 100K in savings (or deposit as they call it) then you would only be compensated for the first 50K per name (joint names = 100K) per institution group, so potentially 50K worse off.

Not sure the UK banks are that much at risk, but that's what we all thought before!

http://www.fscs.org.uk/

Sparky.

ah thats interesting , never thought about that, again its that £50,000 per institution thing so no point in having £100,000 with them as its not all protected but could reduce mortgage by paying off £50,000 , offsetting £50,000 and having a mortage of £106,000, think thats correct ?

Hi Daveco,

You pay interest on your mortgage at their specified rate on the capital that you owe once the capital in the offset is taken into consideration, as you have suggested.

So if you have 100K capital (savings) and have a mortgage for 156K by placing the savings in the offset account you are effectively reducing the mortgage capital to 56K, which would attract mortgage interest.

From your post I would suggest you are better off (by at least 0.64%) putting the money into the offset for your mortgage, unless you can find accounts that will pay a greater savings interest (after tax and deductions) than your mortgage.

The other point to consider is the FSCS which provides protection for 50K per person per institution. So RBS group, Santander which both have multiple banks as part of their institution.

I hope that helps

Sparky.

Not all lenders would appear to offer such mortgages and moneysupermarket.com lists the best ones. I dodnt know much about this subject however I have £100,000 in savings with easy access paying on average 3.15 % for the next 10 months but a mortgage of £156,000. I am retired and will seek new employment at some point after a break from working. Does the off set principal work on the basis that any interest rate offered eg 3.79 % for example for fixed term of two years only apply to the difference between the mortgage eg £156,000 and the savings eg £100,000 which is £56,000 ? Any one explain if this is correct or not ?

many thanks