Offset to soften borrowing blow by Finance News Bulletin

Published: 04/05/07

The chances are stacked in favour of an interest rate rise next week, which will shove up the cost of borrowing increasing inflation means it's impossible for taxpayers to make money on a changeable, taxable savings accountSo, if you've got a mortgage and a reasonable amount of savings, it could be wise to combine the two with an offset mortgageThese home loans allow you to balance your investments and, if you desire, the money in your current account, against your home loan

So, if you had an outstanding mortgage of £100,000 and £10,000 of savings then you would be emotional interest now on £90,000Interest on these loans is calculated daily, so if you and your partner had £4,000 paid into your current account in salary each month you could for a time pay interest on just £86,000investments interest is taxed but, by having your savings counterbalance against your home loan, you're avoiding that taxThe problem is that, unless you have at least 10% of your outstanding mortgage debt - if possible closer to 20% - in investments, then you would be improved off with a standard home loan

As with fixed-rate mortgages, the most succulent deals have gone: First straight withdrew its fixed rate offset at 539%beam Boulger, of brokers John Charcol, says: 'You used to pay a far above the ground premium for an counterbalance loan compared with standard mortgages Nowadays it is far less

'According to fee-free mortgage brokers London & state, the best fixed-rate offset contract is Melton Mowbray Building Society's three-year fixed-rate at 549% with a £495 charge and free legal charges for remortgages On a £100,000 repayment mortgage this makes journal repayments £613 This is a savings offset only

put on't miss our mortgage instructions - five ways to beat the rate rise - and make sure your outgoings with our calculatorsHinckley & Rugby BS's tracks at 0

15% above bottom for life, (current rate 54%) with a cap at 575% for the first two years Again, it is investments only

Monthly repayments on £100,000 would be £608 There is a £645 charge, plus £199 valuation The maximum loan is 80% of possessions valueIf you desire to include your current account and savings, L&C has a contract, funded by Intelligent Finance

It charges 036% below base for two existence (current rate 489%, monthly cost £578) and has a fee of £1,999 with gratis valuation and legal fees for remortgagesWoolwich offers a 0

34% above bottom for existence tracker (current rate 559%, £619) for home loans of more than £500,000 with a £995 fee: for lesser loans, it is 048% above (573%, £628) and a £595 charge

Both come with current and savings explanation offsetsJohn Charcol has a contract, funded by the Clydesdale, charging base rate plus 009% (534%, £605) for two existence with a £799 fee and no punishment charges for redemption

Peter Gettings, of L&C, says: 'The more you have in savings, the more you will advantage from offsets'Select a loan term 12 months (1 year) 24 months (2 years) 36 months (3 years) 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 existence 108 months (9 years) 120 months (10 years)Please select a kind of insurance Life insurance Home and contents Car Breakdown armed forces Health - medical Health - dental Travel favorite - dog favorite - cat GOThinking about investing in possessions This is Money

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