Offset mortgages are increasing in popularity according to official figures that have been released.
In 2006, 170,000 mortgages were taken out. Altogether these were worth £29.3bn and according to the Council of Mortgage Lenders (CML), they represented 7% of new lending.
Now, it is thought that offset mortgages account for over 10 per cent of all new mortgage lending.
The reason that offset mortgages may have gained in popularity is perhaps due to the fact that borrowers only pay interest on the net loan amount and this is minus any savings that the borrower may already have.
A leading offset mortgage provider suggests that this is the best type of mortgage for people who have at least 8 per cent of the value of their mortgage in savings.
Offset mortgages are also suitable for people who receive large bonuses or commission on a regular basis.
Another reason why these mortgages are becoming popular is because they are flexible. With an offset loan you come to an agreement for a maximum mortgage. This means that you could pay off some of the loan and then re-borrow up to that agreed amount with no questions asked, unlike conventional loans where you could incur charges for doing this.
Also, with the credit crunch, you could find that getting a loan in the future is a lot more difficult, particularly if your circumstances have changed. This means that agreeing a large borrowing limit now could prove very helpful if the credit conditions don’t improve.
