Borrowers 'do not understand advantages of offsetting their mortgage'

Date:Thursday 26th November 2009
Author: Susanna Kavka

Mortgage borrowers are losing out, as they do not understand the benefits of offsetting their loans, according to First Direct.

Research by the mortgage provider found that 40 per cent of lenders do not understand the basic idea of an offset mortgage. In addition, only 21 per cent see offsetting as a way of saving money.

The company stated that switching to an offset could save almost £25,000 in interest payments and cut four years from the length of time it takes to repay a £100,000 mortgage, paid over 25 years.

First Direct's head of mortgages Jimmy Kelly said: "It's a real worry that consumers are not aware of the benefits of an offset mortgage."

He added that with the company's own offset tracker could mean a savings rate of 5.10 per cent for high earners.

The mortgage provider offers a two-year offset fixed-rate loan, with a loan-to-value of 60 per cent and a rate of 3.9 per cent APR.