Barclays has cut its range of Offset Woolwich mortgages by up to 0.50 percentage points, which could help homeowners repay their mortgage earlier and make them more tax-efficient.
The largest rate cut is at 75 per cent loan to value, reducing 0.50 percentage points to 2.79 per cent above base (currently 3.29 per cent). At 70 per cent loan to value, the rate has been reduced to 2.48 percentage points above base from 2.59 per cent. Offset trackers in the loyalty range have also been cut with the lowest rate now 2.28 percentage points above base, down from 2.39 per cent at 70 per cent loan to value. At 75 per cent loan to value, the rate is now 2.59 per cent above base, down from 2.99 per cent and is the lowest rate ever offered on this product.
Homeowners with savings of £20,000 who switch to the new rate of 2.48 per cent could save £47.36 a month or £14,208 over the loan term with a £150k repayment mortgage. If they also saved £50 a month, they could pay off their mortgage nearly three years earlier by offsetting.
Offset mortgages could also benefit a range of tax payers by helping to limit the impact of tax and inflation. A 20 per cent taxpayer would need to find an equivalent savings rate of above 3.10 per cent, a 40 per cent taxpayer will need 4.13 per cent in interest, and at 50 per cent tax would need to earn 4.96 per cent in interest to get the same savings as offsetting their mortgage (when compared with the 2.48 per cent Offset rate).
Commenting on the new rates, Laoiseach Lynch, head of mortgage products at Barclays said: “Now is a great time for borrowers to take stock and assess how they can make their mortgages and savings work together to limit the impact of tax and inflation. Offsetting is the most tax efficient way to manage both savings and a mortgage so it makes sense for borrowers to look at these options. Also, the added benefit of repaying your mortgage earlier could save you money in the long run, which is good news in any economic climate.”
Offset mortgages are suitable for anyone who pays tax, or has at least five per cent of their mortgage balance in savings or is self employed or invests in Individual Savings Accounts (ISAs). Other benefits also include keeping the savings accessible, as many customers don’t want to commit to a long term bond or a traditional mortgage where you have to overpay. With offset, the money is always accessible but cuts the mortgage interest rate automatically.
Barclays has also reduced the rates on a range of its Woolwich fixed rate and tracker mortgages.
