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borrowers could save £2,500 a year

As the UK faces a New Year financial hangover after spending more than £37 billion* over the Christmas season, one way that could ease the headache is by transferring personal loans and credit card balances to an offset mortgage. For example, homeowners could save almost £2,500 a year with first direct’s offset Mortgage (see table below).

first direct’s offset Mortgage currently has a variable interest rate of 4.75% (4.9% APR) and its in-built flexibility means customers can transfer other loans or credit into a separate account linked to the mortgage.

Borrowers can pay off the loan over whatever period they choose up to age 65, since an unlimited overpayments facility with no penalties is an integral part of first direct’s offset Mortgage. The following table illustrates how customers could be hundreds of pounds better off with a first direct offset Mortgage:

how customers could be better off each month with first direct

comparison†				first direct offset Mortgage rate	monthly interest benefit from transferring to the first direct offset Mortgage
debit
Mortgage	£115k	Halifax	5.75% (5.8%APR)	4.75% (4.9%APR)	£95.83
Loan	£10k	NatWest	11.2%APR	4.75% (4.9%APR)	£27.10
Credit Card	£5k	Barclaycard	14.9%APR	4.75% (4.9%APR)	£46.27
credit
Savings	£20k	Halifax	3.10% AER	4.75% gross (4.85%AER)	£28.17
Bank Account	£3k	first direct	2.00% AER	4.75% gross (4.85%AER)	£6.93
total monthly gain =					£204.29

Alan Hughes, first direct’s Chief Executive, said: “January can be a difficult time as we come to terms with how much we shelled out over Christmas – we ran up a £7.3 billion credit card bill on presents alone*. But the New Year can also be an opportunity to take stock of our finances and get them in order for 2004. All personal loans and credit card balances transferred to a first direct offset Mortgage are charged at an interest rate typically much lower than the standard rates charged on borrowing, so you could pay the debts off sooner and cheaper.”

ENDS

Notes to Editors:

*Figures based on research carried out by research agency BMRB conducted between 17th and 19th October 2003 among a sample of 1,008 adults aged over 16.

† Assumes that loans and credit card balances are placed into a separate account which is linked to the first direct offset Mortgage. The monthly difference for each account shows what the benefit would be if interest was calculated separately on each account linked to an offset Mortgage.
† Halifax mortgage interest rate quoted is the standard mortgage rate for existing customers. NatWest Personal Loan average monthly interest based on their advertised APR for a loan over 36 months.
† Classic Barclaycard typical APR (1.385% pcm).
† Halifax savings account is the Premium Savings Direct Account.
† Rates correct as at 22 December 2003 (Source: Moneyfacts).

Key features of first direct's offset Mortgage:

• 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.
• first direct launched its offset Mortgage in July 2001; it has so far lent over £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 benefit from 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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