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Standard Life moves into the offset sector

Standard Life Bank is launching its first offset mortgage combining borrowers mortgage loan and savings.

The freestyle offset product includes a mortgage and savings account but does not offer a credit card, current account or personal loan facility as Standard believes this may encourage debt or confuse borrowers.

Offset mortgages calculate interest on the difference between the mortgage and savings rather than on the total loan on a daily basis.

The lender says it is entering the offset market in response to demand from IFAs who want to give their clients more choice and because of growing consumer demand.

The offset mortgage is available through intermediaries, who make up about 85 per cent of the bank&#39s distribution, over the internet or by phone.

Its standard variable rate is 5 per cent on loans to value up to 90 per cent and 5.2 per cent on LTVs up to 95 per cent. Both loans offer discounts for five years and six months.

On the 90 per cent LTV, there is a 1.76 per cent discount for the first six months, giving a rate of 3.24 per cent. The rate rises to 4.1 per cent for the next year and then to 4.39 per cent for the next year, 4.55 per cent for the next and 4.56 per cent for the last year.

On the 95 per cent loan, the discount cuts the rate to 3.44 per cent for the first six months, then 4.3 per cent, 4.59 per cent, 4.75 per cent and 4.76 per cent for the final year.

Standard Life Bank spokesman Angus Macleod says: “The freestyle offset mortgage is a simple and straightforward way of paying less interest on a mortgage. Customers can choose if they would prefer to use the offset facility to reduce their mortgage term or their payments.”

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