Offset mortgages ' attractive to higher-rate taxpayers'

Now could be the time for higher-rate taxpayers to consider an offset mortgage, according to one lender.

David Black, banking specialist at Defaqto, claimed that the combination of flexibility, tax advantages and low interest rates make these products an attractive proposition in the current market.

He said offset mortgages can work well for higher rate taxpayers who have a mortgage and a reasonable level of savings.

"They effectively offer tax free interest on savings at the same rate as the mortgage. The savings interest is offset against the mortgage interest payable rather than actually being received," Mr Black explained.

He noted that a savings pot of £20,000 would, at the average offset mortgage rate of 4.25 per cent, reduce the annual mortgage interest by £850 on a £20,000-plus mortgage.

Mr Black said there are some significant differences in the features offered by the 160 different offset mortgages, so consumers should think about what features are important to them when doing their research.

Earlier this week, the Council of Mortgage Lenders reported a 45 per cent like-for-like house lending rise during March 2010.

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2010-05-20 13:35:24 © Moneyextra.com