The Family Building Society has enhanced its offset mortgage product enabling borrowers to use savings to offset against their mortgage to reduce their monthly payments.
Borrowers can elect for a lower monthly payment, keeping the term unchanged. The offset mortgage also allows for overpayments on a one-off or regular basis, with the extra credit available to reduce payments at a later date.
The new option is an alternative to the existing feature that allows borrowers to use savings to shorten the term of the mortgage. In this scenario, if the customer borrowed £200,000 and held £40,000 in the savings account, they would only be charged for interest on £160,000.
A minimum of £100 is needed to open the offset savings account. Borrowers can offset up to 100 per cent of the mortgage if they wish to and have sufficient funds in the linked savings accounts.
Reactions / Provider View:
Keith Barber, director of business development at the Family Building Society, said: “Our aim is to provide a flexible response to the needs of today’s borrower. For the self-employed, first-time buyers and other borrowers whose family members wish to help them reduce the cost of owning their home, our offset mortgage is compelling.
“It is ideal for the self-employed, who have to keep money for tax aside during the year and can struggle to get through purely computer-based credit assessments from some of the larger providers.
“It’s also another viable option for those who have put away money for a specific purpose, such as for a wedding or a special birthday, and who can now reduce their monthly payments or the mortgage term in the meantime.
“Our goal is to make available flexible, easy-to-understand ways of helping people into the homes they want and to treat every potential borrower as an individual.”
Adviser view
David Hollingworth, Associate Director at London & Country Mortgages said: “Offset is a really good product for this market generally. So it is good to see The Family Building Society building on what is already a flexible proposition. Adding this additional functionality will only increase the choice for borrowers, which is always a good thing. The Family Building Society puts a real focus on family members being able to help with their children getting on the housing ladder and this product feeds into that overall approach.
By adding extra functionality to an existing mortgage deal can only improve that, so in this case it is significant.
Charges:
There is no annual management charge. The only stipulation is that you open an Offset Saver Account with the society and deposit a minimum of £100.
Verdict:
Not many lenders offer offset mortgages, so The Family Building Society is firmly building on a product by adding a flexible approach to dealing with borrowers’ situations such as self-employed buyers who can ring-fence the money towards their tax bill in an offset agreement. And first-time buyers can use their savings to reduce the interest on the mortgage.
However, for an offset mortgage to work, borrowers need to have a certain level of savings in the bank to make them worthwhile.
This product is flexible and lets you pay off a lump sum of money without a penalty, so it is good for those who have less predictable earnings. Although slow to take off initially, as offset increases in popularity we will see more lenders looking to innovate on their products.
