Offset mortgages could boost home income plans

Top-rate taxpayers are being urged to transfer to offset mortgage products, in a move that could help them to benefit from home income plans in future years.

At present there is no UK savings account that will give top-rate taxpayers a real return on their savings, according to moneysupermarket.com.

It suggests that people who fall within the new 50 per cent income tax bracket may gain more by transferring their mortgage to an offset deal as opposed to placing their money into savings accounts.

Offset mortgages work by offsetting consumers' savings against the debt of their mortgage, so it means that they are accruing interest only on the remaining balance of the mortgage.

For example, the price comparison website cites a product currently being offered by Woolwich, whereby customers can take out a £175,000 loan at 2.89 per cent and hold £50,000 in a linked savings account, meaning they would only pay interest on the remaining £125,000 balance.

Meanwhile, recent figures from Royal Institution of Chartered Surveyors showing that house price rises are continuing to accelerate could also bode well for mortgage holders hoping to benefit from home income plans.

Ashall Glover Financial Services home income plan advisers