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Treasury takes an interest in offset

Lenders are being warned to go for steady growth in the offset mortgage or risk the market being shut down.

The Treasury is keeping a close eye on the market as savings used to offset interest on a mortgage do not have to be taxed at present, although the Government may close the loophole if the market is used primarily for tax avoidance.

As the offset market is still in its infancy, it is understood the Treasury is prepared to allow the present rate of growth but will change its stance if the pattern of gro-wth accelerates too greatly.

Tax on savings earns the Revenue around £4bn a year.

Lenders are looking to generate interest in the market and in June GE Money Home Lending sales director Cammy Amaira quit to join Intelligent Finance to grow its offset book.

Amaira says: “Although offset pricing has reduced in line with more mainstream products, offsetting credit balances against the mortgage can seriously reduce the amount of interest payable on the mortgage.”

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