Barclays has cut the interest rates of the full range of Woolwich offset mortgages by up to 0.5%.
The largest rate cut is at 75% loan to value, down to 2.79% above base from
3.29%.
Homeowners with savings of £20,000 who switch to the new rate of 2.48%
could save £47.36 a month or £14,208 over 25 years with a £150,000 repayment
mortgage.
If they also saved £50 a month, they could pay off their mortgage nearly three
years earlier by offsetting.
Offset mortgages could benefit taxpayers by helping to limit the impact of tax
and inflation.
A 20% taxpayer would need to find an equivalent savings rate of above 3.10%,
a 40% taxpayer will need 4.13% in interest, and at 50% tax would need to earn
4.96% in interest to get the same savings as offsetting their mortgage, when
compared with the 2.48% offset rate.
Laoiseach Lynch, head of mortgage products at Barclays said: “As the tax year
draws to a close, 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.”
Barclays has also reduced the rates on Woolwich fixed rate and tracker
mortgages.
The Barclays’ announcement tie in with the countdown to put money in to an ISA
before the end of the tax year.
The main difference between saving in an ISA and an offset mortgage is interest
on ISAs is tax-free while offset mortgage interest attracts income tax.
