Offset mortgages are underserved and should be advised on more, lenders argue

Michael Lloyd

April 23, 2018

Not enough lenders offer offset mortgaegs and brokers should advise on them more, David Robinson, national intermediary sales manager at Accord Mortgages, argued.

He emphasised offset mortgages are a key part of the lender’s proposition this year.

Robinson said: “We’re really focused on offset. We’re one of the few lenders that offer a proper offset facility, a fixed rate offset, an offset tied in with interest-only and we’re trying to grow this in 2018.

“Developing full online functionality for offset really helped with the proposition and coupled with the rates we offer, offset is a really good option for us.

“It’s still a potentially underused facility in the marketplace. Not enough lenders offer offset. There are customers that could be offered it but are not and I think that’s partly because there’s not enough choice out there.

“There’s a part for us and other lenders to play in educating brokers to consider offset. We try and do that through our BDMs and our website where we have good information on where offset sits and what we offer for it. It’s definitely an area of the market lenders could support more.”

Ray Boulger, senior technical manager at John Charcol, agreed that they aren’t used much and not enough lenders offer them, but added it’s the broker’s job to talk about them with customers.

He said: “It’s a question of brokers understanding when offset mortgages are suitable and what’s available and offering them when they are appropriate.

“Education for consumers and brokers is important. Part of the benefit is you’re getting tax free return on your savings.

“There’s a big benefit for those who have large amounts available and the account is easy to use and if more lenders offer it, there’s greater public awareness.”

However, Buster Tolfree, commercial director of specialised mortgages at United Trust Bank, thought offset mortgages are only a good idea in theory and there’s a reason why not many lenders offer them.

Tolfree said: “I think they are a really good idea but in my experience when you see them for further advances or remortgaging or second charges, you end up seeing the customer has been servicing the interest but not paying down the capital at the same time, so it depends what the terms are.

“On an offset mortgage there’s not a lot of choice. There will be customers it will be the best product for but I struggle to find the types of customers where an offset mortgage would be the best outcome. Why not take an interest-only?

“There’s an education piece as there is around many mortgage products but I’m not sure if offset mortgages are a huge missed opportunity for customers, brokers and lenders.”

David Copland, director at TMA Mortgage Club, likes offset mortgages and thought they just need to be advised on correctly.

He said: “I have an offset mortgage myself. They’re great if you want to drawdown quickly but have to be advised on properly and I don’t think they’re used and advised on as much as they should be.”

Rob McCoy, senior product and business manager, at TMA, added: “In the past, advisers didn’t advise on them properly. They just wanted to move onto the next customer.”

Craig McKinlay, sales and marketing director at Kensington Mortgages, put the low demand for offset being down to it being more expensive for lenders.

He said: “Offset is great if you have a lot of savings. It’s also expensive for lenders because it’s quite hard to predict how much you’ll be lending because you don’t know how much people will save whereas for a 2-year mortgage, it’s easy to predict what the customer will pay each month and what the balance will stay at.”

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