media

first direct is simplifying offset mortgages in a new guide that clarifies common misconceptions and reinforces the benefits of using a bank account and savings to help pay off a mortgage. The guide about how offsetting works, entitled Get Set, also provides a compendium of the benefits of first direct's offset package.

There is a perception that offset mortgages are complicated - the guide demonstrates they're not. Customers continue to bank as they normally would, with separate accounts, but link savings and current accounts to their mortgage. first direct then calculates the interest customers pay by combining the current account and savings balances while still keeping the actual accounts separate. For example, a mortgage of £100,000 and a combined savings and current account balance of £10,000 means that the customer only pays interest on £90,000. This is equivalent to a monthly saving in repayments of £37.50.

first direct has also recognised that some customers have concerns about putting all their financial eggs in one basket when the interest rate is variable. The guide explains that first direct guarantees all offset Mortgages opened before 1 March 2004 will benefit from an interest rate that will not be more than 1% above the Bank of England base rate for the life of the loan.

With a first direct offset Mortgage, customers can open as many savings and current accounts as they like and manage them all separately, but the total balances will be offset, exploding the myth that a customer's money goes into a single account that is difficult to manage.

The guide also shows that customers do not need a large amount of savings to enjoy the benefits of offsetting. The first direct offset Mortgage rate is among the best in the market - at 4.5% (4.6% APR) - and thanks to the offset Mortgage's flexibility customers can also transfer any other borrowings they have and link them to the mortgage. Customers can pay off this additional debt over whatever period they want, since an unlimited overpayments facility with no penalties is an integral part of first direct's offset Mortgage. And customers will be making their money work for them even if their only balance is their monthly salary.

Alan Hughes, first direct's chief executive, said: "Get Set emphasises the simplicity of offset mortgages, explaining that by offsetting day-to-day savings and current account balances against their mortgage, customers can pay less interest on a daily basis. first direct's offset Mortgage gives our customers one great rate and it's simple and fair. Everyone - even if they don't think they have a lot of money - would be better off with an offset mortgage."

ENDS

Notes to Editors:

'Get Set' was produced as part of first direct's 'Join the better off set' campaign launched on 1st September 2003. A copy of the magazine is enclosed with this press release.

For offset Mortgage case studies, please call David Whitely on 020 7992 1574.

first direct's offset Mortgage:

• first direct has one of the cheapest current account offset mortgages in the market. The variable interest rate is currently 4.5% (4.6% APR).
• first direct launched its offset Mortgage in July 2001; it has so far lent over £3.1 billion in offset home loans.
• The offset Mortgage works just like any other mortgage - except that the borrower can also off-set credit balances from their first direct current account and savings account(s) against their mortgage balance. This reduces the amount of interest they pay on the mortgage, or alternatively they can choose a fixed repayment amount and the extra interest means the mortgage is paid off more quickly.
• first direct offset Mortgage borrowers get the equivalent of 4.50% (4.59% AER) credit interest on their current account and savings accounts if they are offset against the mortgage. As there is no tax to pay on the offset interest, this is an equivalent credit interest rate of 5.63% gross for standard rate taxpayers and 7.50% gross for higher rate taxpayers.
• The first direct offset Mortgage is available as capital repayment or interest only.
• first direct is an award-winning mortgage lender:
  - What Mortgage - Best National Lender over 10 years for four years running, in 2000, 2001, 2002 and 2003.
  - Mortgage Advisor & Homebuyer - Offset Mortgage of the Year 2003
• There are no redemption penalties or Mortgage Indemnity Guarantee (MIG) charges on the first direct offset Mortgage.
• Interest is calculated daily.
• Borrowers can make unlimited overpayments to reduce their mortgage term further.
• Borrowers on capital repayment mortgages can 'borrow back' capital they have already repaid, providing a flexible and inexpensive source of credit for one-off purchases (eg. holidays, cars, home improvements).
• Capital repayment breaks and/or underpayments are permitted with the first direct offset Mortgage.

Back to top