Virgin OneAccount - still a good choice?

Do you know how much the Woolwich/Barclays charge for cash withdrawals from ATMs?

I don't doubt you did the right thing for you at the time.

Its very hard to compare these types of mortgages to other mortgages, it all depends on what else you would have done with your savings/investments and this is usually not known until after the event.

Speaking generally, if all you would do with your savings is keep it in a very good paying interest account (ie you don't go chasing the introductory offers but if your account stopped paying near the top rate of interest you would change accounts) then unless you have today 15% of your mortgage if you pay tax at 20% or 9.5% if you pay tax at 40% in savings on average you have to question whether an offset account is the right decision for you.

If you were starting out today and required a 95% mortgage, would you choose a One Account at 6.49% interest or another offset account at 5.50% interest? Yes i know you also have to consider start up costs.

The One Accounts other benefits are negligible. Taken from their website you can take out a loan at 5.95% compared to the market average of 5.75% :). Their credit card is pointless as most people are maxed out on 0% offers offsetting their mortgage and use a cashback card for purchases with 50+ days interest free period, whereas the virgin credit card clears weekly.

You do get 5.95% on savings account which you should since this is offsetting and also 5.95% on your current account instead of an average

If today you required a 100k, 95% LTV with 30k in savings, choosing a One Account would cost you about 700 a year extra in interest. This is a lot to pay extra for what i see as no other real benefit.

I know people on this newsgroup are very proud and defend the One Account, but i wouldn't recommend one.

I'd even go as far as saying if you don't have a reasonable amount of savings offsetting the mortgage value, why the hell would you choose an offset mortgage, just because its the latest fashion?

Offset mortgages should come with a wealth warning and are only ideally suited for the financially disciplined.

I speak generally and i do have an offset mortgage.

Having read the many replies to the OP (above), where other mortgage providers have been discussed with their relevant advantages and disadvantages. No where have I read of one, to me, advantage of the Woolwich offset mortgage. That is the ability of others to hold a Woolwich on line current and/or savings account and set up a 'savings pot' (in effect just a sub account of the savings account) and offset the amount in the pot against someone else's offset mortgage

This makes it very easy to 'lend' cash, to one's children for example, but keep total control of the 'loan'.

My son has an offset mortgage where the loan was originally totally offset by my deposit in a Woolwich savings account. As time has progressed my son has paid his monthly dues to Woolwich and managed to increase his funds in his own Woolwich account(s) which are also used to offset the mortgage and I withdraw sums from my savings to keep the total offset amount equal to the total amount outstanding on the mortgage.

The advantage to me is that my 'loan' is under my control, and eliminates potential legal problems. The advantage to my son is that his monthly payments quickly reduce his outstanding mortgage but he has no need to overpay. Indeed it would be inadvisable to pay off the mortgage with the savings he has accumulated since the mortgage commenced..

The effect of this is equivalent to me giving my son the interest at the mortgage rate, on the amount of my 'loan'. Woolwich do all the administration and the 'interest' given to my son is at gross rate, at least 20 % of it courtesy of the chancellor, and this annual gift to my son is, for inheritance tax purposes, a gift from income.

The only disadvantage is that I have to rely on my son telling me, monthly, how much to reduce the amount in my savings account. Much less risk than relying on him putting monthly checks in the post!

I looked at the website and saw charges at *some* ATMs -

that wasn't the page I looked at last time, that one was

Phil

the FD product appears to have similar flexibility to the One account with a bit more admin required then.

Phil

out of interest (no pun intended) would you normally pay tax on the interest earned on the savings account ? ie is this a bit of an income tax dodge :-)

Phil

You must be a great dad. Bet you bought your son a car at 17 as well.

The only way to reduce your outstanding mortgage is to overpay. If you have an offset mortgage for a term of 25 years, then not until the end of the 25 years will the mortgage be paid off. If the mortgage is a repayment and you fully offset your son's mortgage and he pays his monthly mortgage cost based at gross, where your savings are not taken into account when you calculate the monthly payment then your son will have overpaid his mortgage by the majority of this total over the year. Come the next year the bank will just reduce his monthly mortgage payment based upon the mortgage balance outstanding over 24 years.

Your son is winning hands down, not only does his dad offset his mortgage amount so he only has to pay the capital, but he has his own savings in a bank account earning him interest.

If your son is disciplined with money then this is ok, if not you might want to suggest that he continues to pay his current monthly payment throughout the term and resist the temptation to reduce it.

"Phil Thompson" wrote

Eh? What admin? FD is "all things to all men". If you want little admin - similar to One - then simply never reduce the balance o/s on the mortgage a/c and have the interest taken from your current a/c each month. This will now run *exactly* like the One a/c, only you'll have a positive number for the current a/c balance, and a (static) mortgage a/c balance, rather than a single combined (negative) balance on your One a/c.

Eg: Suppose mortgage is 100,000, and you have 10,000 other "funds" :-

'One account' would have a balance of -90,000; FD would have mortgage a/c at -100,000 and current a/c at +10,000.

If you spend 500 (eg writing a cheque) on 'One account', the balance "falls" to -90,500; If you spend 500 (eg writing a cheque) with FD, the current a/c balance falls to +9,500 (with mortgage a/c balance still at -100,000).

Where's the extra admin??

No way! The first vehicular donation was a heap of GM junk in Jan

You appear to have misunderstood all I wrote. Are you a financial advisor?

S*it, why bother, read it all again, are you still a financial advisor??

That is the risk I take. But since I have, over a few years, the statistics of amount I reduce my savings monthly then I get a general feel of what he is up to. But so what anything he does costs him not me! And that was what I tried to point out as to a little discussed benefit of offset mortgages.

Look at it this way. I could put the cash sum I have loaned him into a capital secure investment, a building society. Then at the end of the year give hime the *net* interest I earned on the capital invested. None of the invested capital would have offset his mortgage. All I would have gained is reducing inheritance by giving away income. So I could have put the capital into a Woolwich savings account, not offset against my son's mortgage, and would have paid tax at 20% on the interest, maybe taking my taxable earnings over the 20% threshold, with more paperwork on behalf of the IR. .

No it is not a tax dodge. Reducing one's legal tax liability is perfectly acceptable.

Verbal edited.

What do you want some sort of apology. Got to admit if someone writes more than a couple of paragraphs i can't be arsed to read their war and peace rant and will often assume where the author is going.

Not such a great dad after all. My dad is much better and he only uses foul language when necessary.

Then if you can't be arsed to read it all, shut up.

Go seek help.

Most people don't require 95% mortgages -

The current market situation is -

The FTB median LTV is 88% The non FTB median LTV is 67%

(The BTL average LTV is 59%)

It depends whether the 5.5% one is less expensive, over say rolling 3 year terms, taking everything into account.

Which product are you talking about here, and does it offer the same opportunities to save money as the One account flexible CAM ?

Yes, most people ignore the credit card.

I don't understand how other flexible products work. Do they really have a separate current account element paying ~0.1% ? Can't you pay your salary and have the bills debited when they're due, so the money's reducing your mortgage interest ?

What about the fact that the money waiting to pay bills is reducing your interest at a rate of 5.6% ? Rather than sitting in a current account earning 0.1% whilst mortgage interest is clocking up at 5.6% ?

ISTR my thinking at the time was to get as large a LTV (95% £50K) as possible so that I had the facility available should I require it, and then pay it down to MIRAS level (£30K) quickly using savings which, in the event, is what I did. If I could not get the money I paid in out again easily, I would never paid it in in the first place, in which case I would have gone for a standard mortgage. I calculated that this approach cost ~£100 a year on a £50K mortgage, an acceptable price to pay for this flexibility imo; and that didn't take into account the amount I was saving by abandoning the (0.1%) current account.

This is presumably why people choose them. They know they can get the excess out again within 3 days.

I'm not even gong to bother talking about people that do that; they're the numpties the financial service industry lives off.....

Sure, that's easy; 'Pay of the mortgage before you retire or we'll take your house.' I'd be surprised if they don't say words to that effect.

Daytona

I've never paid anything (barclays/woolwich).

In message , use_valid_reply_to_address_but snipped-for-privacy@unusual.com writes

Youve got your son a good deal there, but the supposed IHT benefit you mention is wrong and irrelevant and I dont understand what you mean by 'your loan being under your control'. You are only lending dosh to Woolwich on an instant access account in return for no interest, no more and no less.

None the less - its a good deal. (BTW I am a financial adviser :-))

There are so many variants of the offset mortgage that you can spend days working out which is the best offset for you before you can compare offsets to other types of mortgages.

In its simpliest form, one which i have, there are no start up costs other than the solicitor costs and you have a savings account where your savings offset the mortgage, i can reduce my savings to nil but i cannot go negative and loan money. The current rate is BoE +.75% which is 5.50%.

All the other offset mortgage providers offer either one or more of the flexible features of a One Account. Some as others have mentioned allow the offset to be linked to someone other than the mortgagee. The added flexibility is usually reflected in the interest rate.

No, if a current account is offset then it works like the One Account, if no current account offset feature then you have to have a normal current account with a bank.

True, this loss of interest at the mortgage rate has to be added into the equation, in my case i can set up direct debits and standing orders from my offset account so in reality i should be no worse off than yourself with a One Account, however i choose to hold a separate bank account. I get paid at the end of the month and arrange all my direct debits to come out at the beginning of the month, if i have any money left over i take what i need for the next couple of weeks (I buy everything i can on credit card) and transfer whats left to my offset account (i have a cash card for this account and can take money out of any ATM). Including credit cards, the interest free deals where i pay the minimum and my previous months credit card spending which i pay off in full along with utility bills (i pay my mortgage from my offset account) comes to say 1000 a month. For an average take the middle of the month so 15 days a month i will have money waiting to be used for bills and calculate 1000 @ 5.50% = 55 for the year, half this to get your average 15 days and this is 27.50 a year. I resisted the case to slightly offset this no gain by the 0.10% in my current account. Its my choice, I understand I am losing this amount in interest a year, although this will now change as I have changed to a bank paying 5.50% gross on current accounts.

Its only because I don't know what to do with my money in the current financial climate and there are no early repayment penalties that I have an offset mortgage. I didn't expect to have one till end of my mortgage term, but I am beginning to get used to the liquidity benefits of holding all that cash and I don't know if I could do without this now.

Offset mortgages get discussed on this group quite regular and the majority of the people asking the questions are considering the One Account, I just don't think its the best anymore.

Here's to the next time someone asks regarding offset mortgages.

It's perfectly simple for someone who wants to spend the least amount of money on fees & charges over the entire term, which one, used to the full, is likely to save you the most money ?

I get suspicious of products that are too complicated and/or deliberately complicate things, because it's usually an excuse to make extra charges.

Daytona

indeed, then one day they take the mechanism away.

Phil

what happens if you have the current account down to near zero and wish to "move" some money from the mortgage account - that's the extra admin I was referring too.

Or are they happy to let you run the currnet account down to any overdraft level as long as the total net debt is within the limit ?

Phil