What is an Offset Mortgage?

Written by John Mussi


An offset mortgage is very similar to a current account mortgage - but instead of having everything all in one account, all accounts are held separately.

The offset mortgage concept treats your money as one giant pot, with each element (mortgage, savings, current account etc) separate torepparttar rest. The result is basically a giant overdraft, although it behaves differently.

Offset mortgages are whererepparttar 143943 interest on your mortgage is reduced byrepparttar 143944 funds in both your savings accounts and your current accounts. The more you have in your savings account,repparttar 143945 less interest you pay on your mortgage, which helps you to repay your mortgage faster and more cheaply inrepparttar 143946 long term. Your part ofrepparttar 143947 deal is that you don't receive any interest on your savings or your current account.

The interest is work out by takingrepparttar 143948 state of each account separately and offsetting them againstrepparttar 143949 others so that you can benefit from your savings and pay less interest. A current account mortgage allows you to benefit inrepparttar 143950 same way, except it also acts a bank account so your salary goes intorepparttar 143951 same account that your mortgage is in.

This is slightly different torepparttar 143952 current account mortgage because your mortgage account is separate from a savings and income account that you open withrepparttar 143953 same company. Likerepparttar 143954 current account mortgage, your income and savings are offset against your mortgage, which reduces what you owe. The interest is calculated on a daily basis on that reduced balance.

Offset mortgages work by settingrepparttar 143955 money held in savings and current accounts against your mortgage debt. So instead of earning interest on your cash balances, you pay less interest on your borrowings. The idea of offsetting is that, with less interest to pay,repparttar 143956 mortgage is paid off more quickly and as a result costs you less.

Some of these mortgages can even be linked to your other personal financial commitments and arrangements. One ofrepparttar 143957 main attractions of these mortgages isrepparttar 143958 prospect of paying less interest.

UK debt becoming a cause for concern

Written by Richard Green


The UK attitude toward debt has received a major shift overrepparttar past few years. Where oncerepparttar 143942 UK was seen as a nation that held up thrift as being virtue and considered debt a vice, it has now changed to owing £1.3 trillion on mortgages, credit cards and other loans. The main cause of this growth in debt isrepparttar 143943 British obsession with house ownership, making up 80% ofrepparttar 143944 borrowing. Figures forrepparttar 143945 number of repossession orders granted inrepparttar 143946 first three months of 2005 have reached nearly 26,000, which isrepparttar 143947 highest figure since 1995.

The Consumer Credit Counselling Service (CCCS) reports that calls from people worried about debt have been increased by 50% compared with last year. The Chairman ofrepparttar 143948 CCCS, Malcolm Hurlston, said: "The consumer is spending less and repaying less. There are early signs here thatrepparttar 143949 whole consumer-driven economy may be moving into lower gear.” Inrepparttar 143950 past, homeowners have beenrepparttar 143951 main victims of previous recessions due to their reliance on credit, however, this time it seemsrepparttar 143952 young are most at risk. "We are seeing lots of younger people coming to us for help," said Frances Walker, fromrepparttar 143953 Consumer Credit Counselling Service ( http://www.cccs.co.uk/ ), "They are often very heavily in debt as they have been able to borrow far more than inrepparttar 143954 past. The trouble is they have no assets, so when they get into difficulty they have nothing to fall back on." It is not onlyrepparttar 143955 young who are being affected however, asrepparttar 143956 number of houses exchanging hands each month is gradually decreasing, and high street sales are poor – traditional signs that consumers in general are beginning to suffer. With a number ofrepparttar 143957 UK’s main lenders, including Barclaycard, HSBC, HBOS andrepparttar 143958 Royal Bank of Scotland, recently being warned about bad consumer debts, it seems that consumers need to take on more financial responsibility for themselves, rather than relying onrepparttar 143959 providers to protect them.

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