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The awareness and understanding of offset mortgages among homeowners has more than doubled since Spring, first direct’s new offset Mortgage Index has found.

The research showed that 45% of UK homeowners are now aware of offset mortgages, compared with only 20% in early 2003. Awareness is highest among Londoners – 56% of homeowners in the capital have now heard of offset mortgages.

first direct is one of the UK’s largest providers of offset mortgages. Since July 2001 it has lent more than £3 billion in offset home loans. first direct’s award winning* offset Mortgage is one of the most flexible on the market, with no hidden charges or penalties, the ability to offset a current account as well as savings balances, and a full ‘borrow back’** facility.

The growing awareness of offset mortgages coincides with a greater understanding of their benefits. Of those who are aware of offset mortgages, two thirds understand the concept of offsetting savings and current account balances against mortgage borrowing to reduce the amount of interest paid. 75% of London homeowners say they understand offset mortgages.

The research also found that understanding is higher amongst men than women (69% versus 62%) and, in terms of age, understanding is highest amongst the 35-44 year-old age group (80%).

Alan Hughes, first direct’s chief executive, said: “first direct’s offset Mortgage Index has found that more and more people are waking up to the benefits of offset mortgages. A mortgage is probably the single biggest expense people have and it’s certainly good news that more people know they could save thousands of pounds and pay less each month by choosing an offset mortgage. first direct’s offset Mortgage is more than just a loan, it gives customers the flexibility to pay their mortgage off early and for less.”

ENDS

Notes to Editors:

* 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.

** 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).

The Spring research was carried out over the telephone by research agency BMRB among a sample of 999 UK adults aged 18+. The fieldwork was conducted between 29th and 31st March 2003

The Autumn research was carried out over the telephone by research agency BMRB among a sample of 3,013 adults aged 16+ between 5-7 and 12-14 September 2003.

Awareness of offset

When all homeowners were asked whether they were aware of offset, the responses by region were as follows:

	All	Regional Summary
		North	Midlands	South
Yes	45%	41%	46%	48%
No	54%	58%	58%	52%
Don't know	1%	1%	1%

Understanding offset

All homeowners that had heard of offset were asked which phrase best described an offset mortgage.

	All	Regional Summary
		North	Midlands	South
A mortgage where any savings you have are balanced against your borrowing to reduce the amount of interest you pay	66%	57%	65%	72%
A mortgage which has flexible repayments	9%	11%	10%	8%
A mortgage which has a discounted rate to start with and then a good variable rate	5%	6%	6%	4%
A mortgage which has a permanently fixed interest rate	4%	4%	5%	2%
A mortgage which you can pay off over up to 40 years rather than the standard 25 years	3%	3%	2%	4%
Don’t know	13%	19%	12%	9%

Key features of 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 4.75% (4.9% APR).
• first direct launched its offset Mortgage in July 2001; it has so far lent over £3.3 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 4.75% (4.85% AER) credit interest on their current account and savings accounts if they are offset against the mortgage. As there is no tax to pay, this is an equivalent credit interest rate of 5.94% gross (6.10% AER) for standard rate taxpayers and 7.92% gross (8.20% AER) for higher rate taxpayers.
• The first direct offset Mortgage is available as capital repayment or interest only.
• 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.
• Capital repayment breaks and/or underpayments are permitted with the first direct offset Mortgage.

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