Mortgage rates have been leaping all across the board recently – offset, sub prime, self cert and even safe prime mortgages are a lot more expensive than they once were. So to combat this, you must reduce mortgage interest somehow, and the best way to do that is to offset savings against your mortgage. But is it as critical as the newspapers say? The media love a horror story, but what truth is there behind the rate crisis in the UK mortgage market? Will you be able to find a cheap mortgage anywhere? Do you need to reduce mortgage interest now?
Simply, yes – you do need to reduce mortgage interest now. Rates are higher than they have been for several years, so if you are coming to the end of your mortgage you are in for a shock. Recent figures have found that 1.4 million people are coming to the end of their short-term fixed rate mortgages and could see a 25% hike in their monthly payments*. So there has never been a more critical time to reduce mortgage interest.
You have a choice as a homeowner – stick with a fixed rate and pay hundreds of pounds more each month for the next few years, or choose offset. Offset mortgages do not have a lower rate than fixed rate mortgages, but if you begin to save you will reduce mortgage interest. That is what they are designed to do – reward people who save their money. The more money you offset, the lower the rate at the end of the month. It’s simple and it could be just the thing to survive the current economic turnaround.
Talk to a home or commercial mortgage broker as soon as possible if you are coming to the end of your old, cheap mortgage. And don’t delay. You can begin to negotiate for a mortgage and begin shopping around a long time before you actually come to the end of the last deal. To reduce mortgage interest you have to plan ahead and be ready for any eventualities.
It may be tough for the first few months. A larger rate, alongside rising living costs, means it might seem impossible to save anything extra against your home loan. But it is never impossible. Your mortgage broker can help you formulate a plan that will help you save and then reduce mortgage interest. It might take some sacrifice and it certainly won’t feel like you are doing anything good to begin with, but eventually when you start to see the offset amount reduce mortgage interest you will know why you worked so hard.
Offset has many advantages – a supply of extra cash at your fingertips, flexibility in terms and criteria and obviously the chance to reduce mortgage interest. But like any other financial vehicle, you need to work as hard at the mortgage or it can become a burden. So don’t let it – reduce mortgage interest.