Future of offset mortages

[NickGibbs]

What does everyone think. Will the banks move away from offering these in the future? (because they are interest-only)

Reason I'm asking. I've got one and need to switch after coming out of a 2-year deal.

Same bank (First Direct) is offering a 1.99% 2/yr no-fee, or 2.24% for £1500 but continuous.

First obviously better, but I could be up the spout if they hoick up rates in two years to dissuade new users, but is that me just being overly fearful?

[Sarnie]

NickGibbs said:

What does everyone think. Will the banks move away from offering these in the future? (because they are interest-only)

Reason I'm asking. I've got one and need to switch after coming out of a 2-year deal.

Same bank (First Direct) is offering a 1.99% 2/yr no-fee, or 2.24% for £1500 but continuous.

First obviously better, but I could be up the spout if they hoick up rates in two years to dissuade new users, but is that me just being overly fearful?

There is no threat to Offset products, that I'm aware of.............they are not Interest Only mortgages..........

[NickGibbs]

Sarnie said:

There is no threat to Offset products, that I'm aware of.............they are not Interest Only mortgages..........

They can be. The bank doesn't require me to pay any more than just interest (though I do)

[Magic919]

I can see your point, as the capital repayments are voluntary. Can't see them withdrawing or changing the product now. It'd be long gone already if there was some need to do so.

[oyster]

Magic919 said:

I can see your point, as the capital repayments are voluntary. Can't see them withdrawing or changing the product now. It'd be long gone already if there was some need to do so.

Having an offset mortgage does not make capital repayments voluntary. That is entirely dependent on the mortgage deal you have.

[oldbanger]

oyster said:

Having an offset mortgage does not make capital repayments voluntary. That is entirely dependent on the mortgage deal you have.

Agreed, my mortgage provider does not offer interest only even in emergency circumstances for existing customers - I have a 10 year fixed offset product with them

[Magic919]

oyster said:

Having an offset mortgage does not make capital repayments voluntary. That is entirely dependent on the mortgage deal you have.

We are talking about First Direct and it does. Terms and conditions 1f.

[Sarnie]

NickGibbs said:

They can be. The bank doesn't require me to pay any more than just interest (though I do)

Of course they can be..........Eg you can have it on Interest Only or Repayment.....but Offset mortgages are not Interest Only mortgages as you said............your point was asking if they are in danger of being pulled in the future "because they are Interest Only mortgages" which they aren't.

[NickGibbs]

Well I wasn't looking for a definition, more an opinion on whether newly cautious banks would continuing offering a looser arrangement like offset. Or maybe they'll become less cautious again?

[FredAstaire]

The first direct offset mortgage is interest only , isn't it?

[CarlosFandango11]

NickGibbs said:

Well I wasn't looking for a definition, more an opinion on whether newly cautious banks would continuing offering a looser arrangement like offset. Or maybe they'll become less cautious again?

How are offset mortgages looser? You still make the same repayments as a normal mortgage.

[Sarnie]

FredAstaire said:

The first direct offset mortgage is interest only , isn't it?

Yes.

But they can be either.

The OP asked if there was a risk in the future to Offset mortgages, which there isn't.

Is there a risk to Interest Only mortgages? Yes, always. 10 years ago anyone could tick a box and choose an Interest Only mortgage.......5 years ago they were vitually no-existent...........today they are more and more freely available......subject to certain LTV, Equity and Income criteria etc.....

[Sarnie]

swerni said:

I agree with Nick.
I've had one for a very long time and I'm surprised they don't require you to show somw kind of investment vehicle to pay down the capital.
A "normal" mortgage is capital and interest, you could in theory have an offset for 25years and pay no capital at all.

Sarnie you know this stuff better than all of us and I agree on what you say, in therory they can be both, but in the First Direct into blurb about the prouduct, it does refer to it as interest only.

Of course, I'm not saying it isn't just that the OP asked if Offset mortgages are in danger, they aren't.

With regards to the initial comment, your mortgage was transacted under T&C's that obviously didn't require you to have a specified repayment vehicle, therefore that can't be changed. They will be required by the FCA to send you regular letters about checking the performance of any investment you are intending to use to repay the loan blah blah blah.

However, if they decide to target a certain area of their mortgage book that they no longer like the look of (high LTV, income stretched, Interest Only, self employed or anything else they don't like the look of) they can systemically edge you out by not allowing you to port the mortgage when you want to move house, offer you product transfers when your rate expires or further advances when you need further lending.....none of which they are obliged to offer you........

[CarlosFandango11]

swerni said:

I agree with Nick.
I've had one for a very long time and I'm surprised they don't require you to show somw kind of investment vehicle to pay down the capital.
A "normal" mortgage is capital and interest, you could in theory have an offset for 25years and pay no capital at all.

Sarnie you know this stuff better than all of us and I agree on what you say, in therory they can be both, but in the First Direct into blurb about the prouduct, it does refer to it as interest only.

You're talking about an interest only mortgage, whether or not it's an offset is not relevant.