Analysis of offset mortgages in latest Housing Finance
But their future appeal may be as much to reduce the cost of expensive unsecured debt, according to an article in the latest issue of the CML's journal, Housing Finance.
The article, by NOP Financial, points out that many customers continue to hold additional savings accounts and borrowings separate to their current account or offset mortgage. This might be because customers are cautious about putting all their eggs in one basket, or it could be that they do not fully understand offsetting. The article concludes that this means that lenders need to continue educating customers about how offset products work.
Typically, people taking out offset mortgages are more likely than others to shop around for financial products. Only a third of offset mortgage holders state that, in general, they tend to stick to established products from tried and tested suppliers compared to over half of all mortgage holders. So at present, offset mortgage holders tend to be people who are at the forefront of taking out new financial products.
However, the authors point out how quickly consumers have responded to the availability of “flexible” mortgages, and they suggest that offset products have the potential for widespread appeal. In Australia, for example, where offset mortgages are popular, many consumers have become adept at using their mortgage as a way of managing their wider finances. And, the article concludes, although the concept of offsetting has so far been pitched primarily at those who have savings to offset, there is another largely untapped group who would benefit from offset mortgages among people who make high use of unsecured borrowing.
As well as the article on offset mortgages, Housing Finance number 57, Spring 2003, also contains a commentary on the housing and mortgage markets, as well as articles on:
* The rise and rise of mortgage churn in the UK;
* The impact of rising graduate debt on the first-time buyer market;
* Mortgage equity withdrawal: evidence from CML market research; and
* E day – June 2003: will the five economic tests be met?