More than half of homeowners don’t understand offsets
The survey of 1,000 people shows that 52% of respondents feel unable to outline what exactly an offset mortgage is designed to do and of this figure, only 48% are able to correctly identify the main benefits of the product.
Most people admit they just didn’t know (31%) while 10% think an offset mortgage allows you to defer mortgage payments for 12 months and another 10% believe that it allows you to switch to a new rate at any stage.
Jeremy Duncombe, director at the Legal & General Mortgage Club, said: “It’s worrying that that such a lack of understanding persists about a product that could be ideally suited for some UK homeowners.
“This figure is an improvement on previous market studies illustrating the good work done by advisers in educating clients. However it is still a concern.”
Duncombe said that it’s frustrating that many consumers could be missing out on the benefits of an offset product during a period of record low interest rates.
He said: “For many offsets will be a great option as they help you reduce your mortgage term interest and with rates on savings accounts so low it could offer an attractive way to make your savings work harder for you.
“It’s crucial during these uncertain times that people choose the best possible product for their circumstances.
“Speaking to an adviser can help you to explore the different products on the market and fully understand what you are buying and all the potential ramifications.”
The survey also revealed that education levels were much higher in some parts of the country.
Homeowners in the East Midlands are most savvy when it comes to understanding offset with 65% able to correctly identify that it balances savings against the total debt of your mortgage.
They are closely followed by homeowners in East Anglia (63%) and Wales (58%). Unfortunately respondents in the North-West least understand the benefits with only 31% correctly identifying the purpose of the product and respondents in Scotland (33%) and Yorkshire and Humber (37%) not far behind.
Further findings reveal that 33% believe that the main benefit of an offset product is that it could reduce the term of their mortgage.
Some 16% suggest that the main benefit was it offers a lower rate of interest and 11% believe they can take the product with them when they move house.