Better in the promise than in the execution

Kevin Paterson, managing director, Park Row Independent Mortgages. Recent research indicates that a third of IFAs believe that offset mortgages will represent more than half of all borrowing within five years and blame the lack of recent growth in this market on lack of customer understanding. The only thing this demonstrates is that IFAs have a poor grasp of the fundamentals of the mortgage market. Anyone who knows mortgages, and in particular offsets, will tell you that they are better in the promise than in the execution.

I always found it ironic that a mortgage should attract a client who wants to invest – especially in these bear market times – with the promise of reducing the mortgage interest by offsetting the interest earned on their capital. Repaying debt is the new investment. Certain offsets have been popular among brokers as a stopgap to a longer term solution, especially where the client wants to draw down additional funds in the short-term. But we invariably see a move to a more competitive option within a year of taking out the mortgage. The most dangerous offset is The One account, a current account mortgage which gives the client an agreed overdraft limit and requires iron discipline to retain control and not spend the entire overdraft.