While rising interest rates are bad news for borrowers, those with savings may benefit from an offset mortgages, reducing your mortgage term and therefore the interest you pay.
An offset mortgage lets you link your savings to your mortgage, reducing the interest you pay. Unlike overpaying on your mortgage, which reduces the interest. With an offset you retain access to your cash so you get the same benefit in reducing your mortgage payments. But can access your money at any time if you need it in an emergency.
Offset mortgages are also popular among self-employed borrowers who may be building up their savings in order to pay a tax bill at the end of the financial year. An offset lets them use those savings in the meantime to reduce the interest they pay on their mortgage. With savings rates still relatively low, even though they are slowly rising, an offset mortgage is a way of making your savings work harder.
There may be a slight premium to pay on the rate with an offset compared to standard mortgages. But given that it is one of the few truly flexible mortgages. It may be worth paying this to access the benefits. And, of course, those with substantial savings will reduce their interest rate anyhow.
With only a few lenders offering offset mortgages, a whole-of-market broker such as AWS Private Finance will point you in the right direction. Get in touch to find out whether an offset is the right mortgage for your circumstances.
