first direct

first direct

September 01, 2012 03:00 ET

Everyday Financial Offsetting Grows While Less Than 1 in 10 Offset Their Mortgage

- 71% of people make trade-offs in their everyday life

- 1 in 4 chose their bank for its good customer service alone

- Average saving of GBP36,600 using an offset mortgage

LEEDS, UNITED KINGDOM--(Marketwire - Sept. 1, 2012) - Seven in ten people are making the most of their money with daily trade offs or 'everyday offsets,' according to research from first direct bank.* This is compared with an estimated 6.5% who have recently taken a similar approach with their home loan by offsetting their savings against their mortgage.**

The main reason people make trade offs is to make the most of their money (35%) with a further quarter saying it just makes sense. Twenty three percent said it helps them enjoy their life more.

first direct has calculated that 40% tax payers, with an average £183,532 mortgage and typical cash savings of £36,706, could save nearly £36,600 each in interest costs if they used the tax efficient benefits of an offset mortgage rather than a repayment style mortgage.***

Top 5 Personal Finance and Property Trade Offs

  1. I cut back on spending now to save more for the future (30%)
  2. I chose my bank for customer service but it may not always have the best rates (24%)
  3. I live in a smaller property so I can live in a more desirable area (18%)
  4. I chose my bank for its rates but it doesn't always have the best customer service (12%)
  5. I overpay on my mortgage rather than putting into accessible savings (9%)

The most popular personal finance offset is cutting back on spending now to save more for the future (30%). When choosing where they bank, 24% of people go for good customer service despite not necessarily always getting the best rates, while 12% make the opposite compromise - going for better rates but often getting poor customer service. Nine percent of people overpay on their mortgage, giving up access to their money in favour of paying down debt.

In terms of property trade-offs, it would appear that location is everything as 1 in 5 (18%) said they would live in a smaller property if it was in a nicer area, which is three times as many as would live in a big house in a less desirable area (6%). Seven percent said they live in the countryside even though it means they spend more money on commuting.

Davnet Reid, Head of Customer Marketing at first direct, commented:

"While offset mortgages-holders are still in the minority, and many people may not even know what an offset mortgage is, it appears that the vast majority of people enact some form of offset in their everyday lives. They may not even be conscious that they are doing it, but they are instinctively weighing up their options and making a trade off that gets them the best deal and makes their money work hardest for them.

"Those people who have already made the trade off of reducing their current expenditure in order to save money for the future may find that their money works even harder if it is offset against their mortgage, foregoing interest on their savings to reduce the size of their loan they have to pay interest on."

Demographic Breaks

Younger People Offsetting

Perhaps as they have less money, young people are much more likely to offset in almost all aspects of their lives as they try to make the money they have work harder for them. Almost 8 in 10 said they offset (78%) compared with a low of 64% in the over 55s. It would seem that money is the defining factor in this as 50% of under 24s said they trade off to save money, compared with just 29% of over 55s. Mindful of future expenses, the youngest age group are most likely to be cutting back on expenditure now in order to have more savings in the future (36%).

* Research conducted among 2,001 UK adults between 6th and 26th June 2012

** CML figure for the 2012 average percentage of new loans (house purchases and remortgages) with offset features

*** Follow link for details:

Notes to Editors

first direct offset mortgages explained

Instead of receiving interest on your savings, you can link your savings and 1st Account balances to your mortgage so you only pay interest on the difference. As you don't earn interest on your savings, there is no tax to pay on them, and your savings can be accessed at any time.

first direct facts

  • Winner of the Which? Best Financial Provider award 2 years running

  • Ranked first in the Retail Banking Satisfaction Study by J D Power & Associates for two years running

  • first direct has 1.2 million customers

  • 950,000 of them use Internet Banking

  • more than 1 in 4 of first direct's customers join because of personal recommendation

  • over 91% of customer contact with first direct is electronic

  • first direct is a wholly owned subsidiary of HSBC Holdings Plc

first direct provides both telephone banking and online banking services to its 1.2m customers. It offers a full range of personal banking products including its award winning Current Account and offset mortgages.

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