Borrowers are failing to benefit from an offset mortgage due a lack of understanding of they how these deals work, research from Accord Mortgages revealed.
The findings of a survey of 201 intermediaries conducted by BDRC Continental and commissioned by the intermediary-only lender in November revealed the majority of brokers (94 per cent) believed a better range of tools from lenders could help them to dispel misconceptions about offset mortgages.
According to the poll from the Yorkshire Building Society-owned company, online tools, more case studies and detailed key facts illustrations (KFIs) were cited as the best ways to achieve this by respondents.
Almost a quarter (23 per cent) of brokers questioned found explaining offset mortgages to clients challenging, while 12 per cent admitted to having limited knowledge of this type of home loan.
While brokers acknowledged the present economic conditions were ripe to reap the rewards of an offset mortgage, the findings showed this was not translating into business with a large majority (83 per cent) of respondents agreeing that offsets give borrowers a chance to capitalise on the current low interest rates on savings.
However, 41 per cent of brokers said they dealt with no more than two offset cases last year.
David Robinson, national intermediary sales manager at Accord, said: “Brokers have a good handle on the advantages of offsets, however whilst most borrowers understand what a mortgage is the intricacies of an offset are sometimes not as easy for some to comprehend.
“Interestingly only 37 per cent of all the self-employed borrowers we spoke to applied for their mortgage via a broker. This suggests that offset mortgages present a golden opportunity for intermediaries who can expertly navigate clients to the best offset option, if appropriate, coupled with greater support from lenders.”
Separate research conducted by the Yorkshire Building Society Group among 156 self-employed and high income professionals in December confirmed awareness and understanding of offset mortgages is limited among self-employed or contractor workers.
Almost a third (29 per cent) of the self-employed workers questioned were unaware they could reduce the interest they pay on their mortgage by linking their home loan to their savings.
Only 10 per cent of those who said they were familiar with this type of home loan actually had an offset, despite the majority (63 per cent of all respondents) indicating they wanted to pay off their mortgage as soon as possible, or they wanted to make their money work harder.
Brian Murphy, head of lending for Mortgage Advice Bureau, said Accord’s research suggesting that a little over a third of the self-employed borrower group surveyed arranged their mortgage via a broker was in stark contrast to the fact that more than two thirds of all mortgages are arranged via the broker community.
Mr Murphy said: “This perhaps suggests that the self-employed group of clients, for whom offset mortgages will often be one of the best options, are perhaps not taking advantage of the benefits of using a broker.”
