Barclays cuts offset mortgages
The largest rate cut is at 75% loan to value, reducing 0.50% to 2.79% above base (currently 3.29%). At 70 per cent loan to value, the rate has been reduced to 2.48% above base from 2.59%.
Offset trackers in the loyalty range have also been cut with the lowest rate now 2.28% above base, down from 2.39% at 70% loan to value. At 75% loan to value, the rate is now 2.59% above base, down from 2.99% and is the lowest rate ever offered on this product.
Homeowners with savings of £20,000 who switch to the new rate of 2.48% could save £47.36 a month or £14,208 over the loan term with a £150k repayment mortgage. If they also saved £50 a month, they could pay off their mortgage nearly three years earlier by offsetting, according to Barclays.
Offset mortgages could also benefit a range of tax payers by helping to limit the impact of tax and inflation. A 20% taxpayer would need to find an equivalent savings rate of above 3.10%, a 40% taxpayer will need 4.13% in interest, and at 50% tax would need to earn 4.96% in interest to get the same savings as offsetting their mortgage (when compared with the 2.48% offset rate).
Commenting on the new rates, Laoiseach Lynch, head of mortgage products at Barclays, said: “As the tax year draws to a close, now is a great time for borrowers to take stock and assess how they can make their mortgages and savings work together to limit the impact of tax and inflation. Offsetting is the most tax efficient way to manage both savings and a mortgage so it makes sense for borrowers to look at these options. Also, the added benefit of repaying your mortgage earlier could save you money in the long run, which is good news in any economic climate.”
Offset mortgages are suitable for anyone who pays tax, or has at least 5 per cent of their mortgage balance in savings or is self employed or invests in Individual Savings Accounts (ISAs). Other benefits also include keeping the savings accessible, as many customers don’t want to commit to a long term bond or a traditional mortgage where you have to overpay. With offset, the money is always accessible but cuts the mortgage interest rate automatically.