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Offset home loan numbers 'surge'

Savings can be offset against mortgage debt.
The number of offset mortgages has surged in the past year, the Council of Mortgage Lenders (CML) has said. Last year, 170,000 offset mortgages, worth nearly 30bn, were taken out, a 49% increase over the past year. Experts suggest that the increased popularity is due to offset mortgage rates becoming more competitive when compared to fixed rate loan deals. They allow borrowers to offset savings and current account balances against their mortgage debt.

Flexible.
They are designed to be flexible, allowing the borrower to make over-payments and under-payments on the loan. For example, someone with a mortgage debt of 100,000 and 10,000 in savings would only pay interest on 90,000 of the loan. Paying less interest can allow the borrower to repay their mortgage debt sooner. Offset mortgages originated in Australia and came to the UK in the mid 1990s �I think that, finally, after more than a decade, the offset mortgage concept has eased into the public consciousness� - Andrew Montlake, Cobalt Capital.

Market moves .
When introduced to the UK, offset mortgages initially proved popular. They were heavily marketed by banks and building societies. But their popularity was usurped by more competitive fixed-rate mortgage deals. However, recent movements in interest rates mean that fixed-rate deals have become more expensive. This, according to mortgage experts, has helped encourage people to switch back to offset mortgage deals. "There has been a turnaround in the fortunes of offset mortgages," Andrew Montlake, director of mortgage brokers Cobalt Capital, said. "Fixed-rate mortgage rates have gone up making offsets more competitive. "I think that, finally, after more than a decade, the offset mortgage concept has eased into the public consciousness," Mr Montlake added.

BBC NEWS
June 28

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