25 Nov

Offset mortgages 'could offer big savings'

Offset mortgages 'could offer big savings'

Consumers who take out an offset mortgage could make substantial savings over the term of their loan, one lender has claimed.

Research released by First Direct demonstrated that homeowners could also reduce the length of their mortgage. In an example, the company claimed that a £100,000, 25-year mortgage could be cut by four years, making a saving of £24,232 on interest.

However, despite these benefits the survey revealed that 40 per cent of consumers do not understand the advantages of switching to an offset mortgage and a further 35 per cent said that they were not sure how such loans worked.

Jimmy Kelly, head of mortgages at First Direct, commented: "It's a real worry that consumers are not aware of the benefits of an offset mortgage."

Offset mortgages work on the principle that the borrower sets his or her savings against the value of the loan and agrees to lose all interest payments on that amount in order to reduce the level of debt on a property.

According to the Daily Mail's financial website, this can be particularly advantageous in a low interest environment, where savings are not performing well.

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