One in four households better off with offset

Amanda Jarvis

January 6, 2006

However, the mortgage market doesn't stay still for long as swap rates go up and down and product rates change accordingly. Intelligent Finance's offset mortgage range remains at a competitive level within the market. So Intelligent Finance has crunched those numbers again to reveal that as 2006 gets started – one in three UK households looking for a mortgage are now likely to be better off with offset.

Intelligent Finance's research revealed that 1 in 3 UK households looking for a new mortgage could save an average of £312 a year on their mortgage simply by taking an offset tracker 95 product with Intelligent Finance and moving their current account, direct access savings and ISAs to the bank.

Nick Robinson, Managing Director of Intelligent Finance said: “Datamonitor has revealed that the offset and current account market grew by over 63% every year between 2000 and 2004 and predicts that these products will account for 30% of all UK secured lending by 2009. One of the main reasons for this growth is likely to be a greater understanding amongst brokers and clients on how offset can provide benefits.”

“Our offset sales performed particularly strongly towards the end of 2005 with Moneyextra.com citing Intelligent Finance as the second most popular mortgage lender in October. So, as one of the key lenders in the offset market, we are well-placed to support brokers in selling the offset message and will be running a marketing campaign stressing the one in three message across the UK, which will be running from 8 January 2006.”

Now – here's the science bit…

IF purchased data from MORI – the results of their financial survey collected during Jan-Dec 2004 which was a 4358 volume sample.

The data contained key information on the respondents as follows
– demographics/profiling info e.g income, age, postcode, mortgage holder type
– financial product holdings and value ranges (e.g 10-20K) for those products

The mortgage value ranges in the results are representative of GB residential mortgage holdings. We assumed for the purposes of this calculation that the product holding portfolio and liquid asset ratios therein are representative of households taking out new mortgages generally.

To understand if a household would benefit from an offset mortgage we calculated their net interest position over the first year with their mortgage savings and current account balances held separately in traditional accounts and compared this result with offsetting the same balances with Intelligent Finance.

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