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&#39Educate public on offset loans&#39

Borrowers with expensive unsecured loans should use offset mortgages to reduce the cost of their borrowings, says market research firm NOP Financial.

In the CML&#39s Housing Finance journal, it argues that the marketing of offset has focused on the benefits of offsetting savings against the mortgage to reduce the amount of interest paid. But it points to markets such as Australia where borrowers without savings are adopting offset mortgages to pay off unsecured debt with high levels of interest.

NOP Financial says lenders must educate customers about how offset works. It says caution and lack of understanding mean many borrowers continue to hold savings accounts and borrowings separate to their current account or offset mortgage. But it believes people have responded positively to the flexibility of offset mortgages and, as a result, such loans will be able to widen their appeal.

Intelligent Finance sales and marketing director Ian Jeffery says: “Research conducted for us at the end of 2002 indicated a further 10 million UK banking customers would consider switching to a bank providing offsetting.”

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