How to finance my house purchase.

wrote

Do you think it's much more likely to go up than down? What if it *did* go down?

What is the interest rate on the mortgage and what is the interest rate on the savings account? I expect that interest rates would have to go up a long way before you start making a profit, especially when you take into account the tax you would pay on the interest (I am assuming you are a tax payer?).

Of course, over a 10 year period interest rates may well change significantly from the current value.

You may also consider that the bank may prefer to sell you two products rather than none, and that their suggestion of a mortgage and savings account may have been influenced by this.

Gareth.

In message ,

127.0.0.1@127.0.0.1 writes

Lucky bastard

If you are finding it hard to make a decision, buy it with cash, then you can always remortgage it at your own convenience.

Not a bad idea - you can then draw the cash if an opportunity arises.

Did they also say what would happen if interest rates went down??

Offset sounds good to me.

No you dont - you could rent somewhere else.

X-No-Archive: yes

Well ignoring the banks accounts I can see Brittania do a 10 year fixed at

5.6% APR.

Various accounts online offer 5% I think abbey do and ING aren't far off. So really I would have a 10 year mortgage and hope the rates go up.

Cheers

Don't forget the tax; you will need 7% Gross to get 5.6% if you are a basic rate tax payer.

In message ,

127.0.0.1@127.0.0.1 writes

But the fix is at only 4.99%, which is pretty good. The APR is higher because it takes into account the higher rate that *might* apply doe the remaining 15 years of the mortgage and the fees.

>

I agree entirely, but the OP should bear in mind that for offset mortgages, the interest from the savings/deposit account if applied to the mortgage account is gross - not sure how long Gordon will allow that one though!

"Matt Robertson" wrote in message news:4dPdf.7422$ snipped-for-privacy@text.news.blueyonder.co.uk...

In an offset mortgage there is no interest from a savings/deposit account. (assuming that the mortgage is greater than the balance of the account)

Come on, you know you're splitting hairs.

"Matt Robertson" wrote

How is that splitting hairs? You suggested that Gordon might start to tax something that doesn't exist - how could he possibly get away with that?!

By "deeming" it to exist?

"Matt Robertson" wrote in message news:d78ef.8201$ snipped-for-privacy@text.news.blueyonder.co.uk...

Not at all. There is no 'interest applied to the mortgage' , because there isnt any interest earned. That is the key difference compared to having a separate savings account and mortgage. Hence there is nothing to be taxed.

"Doug Ramage" wrote

Of course, he could try - but do you *really* think that he'd be able to "get away with it"? !!

And if he *did* try, then what "interest rate" do you think he would assume was being paid?

Suppose savings are (say) 20% of initial mortgage loan. Then, a rate of (say) 5.5% on "offset mortgage/savings", could be equivalent to either 5.0%(mortgage), 3.0%(savings) -or- 4.5%(mortgage), 0.5%(savings) :-

(100K-20K) x 5.5% = 4.4K, against either: (100K x 5.0%) - (20K x 3.0%) = 4.4K. or: (100K x 4.5%) - (20K x 0.5%) = 4.4K.

So, should Gordon "deem" the interest rate to be 3.0% or 0.5% on savings? - or anything else?

I can see it now - Gordon: "I want some more tax, so I'm going to pretend that you have something that's taxable and therefore make you pay tax on something that I've just made-up..."!

He would, but not for long, because the banks would respond by abolishing offset accounts and replacing them with flexible loan accounts, which allowed you to pay your savings into them (thus reducing the balance on which interest is charged), subject to the proviso that you can always re-borrow them whenever you wanted.

In other words the effect would be the same, without the need to keep a separate savings account on which no interest is paid in exchange for not charging interest on an equivalent portion of the loan balance (which is how I understand an offset account works).

Why bother with fictional rates when the facts speak for themselves? Here is, in effect, a savings account which is earning 5.5% interest, so that's how it should be taxed. It would probably be deemed to be untaxed interest of 5.5% of £20k, leading to an additional tax bill of £220 or £440.

Or he could be really sneaky and deem the £1100 to be 5.5% net, and either 80% of £1375 or 60% of £1833, leading to an extra tax bill of £275 or £733.

Domestic rates were, and (I think) business rates still are, a tax on deemed rent. So this pretence would hardly be earthshatteringly novel.

"Ronald Raygun" wrote

Because the FACT is, the savings are attracting ZERO interest - and Gordon wouldn't get much money if he taxed that!

"Ronald Raygun" wrote

Oh NO it's NOT - it is earning 0.000% interest. You can't pretend that it is *actually* earning 5.5% interest, just because the mortgage loan happens to be charged at that rate!

BEHIND YOU!

But it's *not* pretence. What *is*, is that the bank pretends not to be charging you interest on part of your loan in return for not paying you interest on your savings.

"Ronald Raygun" wrote

;-)

"Ronald Raygun" wrote

Actually, nope - that's exactly what happens.

"Doug Ramage" wrote

But where do you stop? A 100K offset mortgage with 20K savings, is equivalent to a "standard" mortgage which started at 100K and where 20K has been paid off so far. Why not also tax this "standard" mortgage in the same way as you suggest for the offset? - "deem" this to be 100K loan & 20K savings and hey presto! Again more tax for the taxman! For that matter, why not do it with any personal loan? What about credit card balance transfers?

Of course, the real anomaly here is that the (personal) tax system is not symmetrical in this respect (unlike the business tax system).

The taxman wants to have his cake & eat it (tax personal savings interest but not grant tax relief on personal borrowings interest) - and your suggestion (of "deeming" some shift between borrowing interest & savings interest) simply gives him some trifle too!

"Ronald Raygun" wrote

Instead, the banks could keep the offset a/c's and simply say: "You actually only have ONE account with us, but when we quote the balance to you - for your convenience - we will split the total balance into two (or more) sub-balances, at your request. For instance, we may show an account with a

80K(D) balance as a 'mortgage' sub-balance of 100K(D) and a 'savings' sub-balance of 20K. You get to choose which transactions are shown on which sub-accounts, and thus control the split of the total balance. Overall, you have just one account but it "looks" like you have more!!"