I have had an offset mortgage since around 2004(or whenever they first started)
When I first took it out(it was new) and at the time was priced above that of taking a fixed rate mortgage. I did the maths and calculated at the that effectively having 25% of the equity of the house in the offset made this a better deal.
I think at the time we were talking about £180k, so all I needed was £45k to be better off. Interest rates were higher at the beginning and I think I was around base 5% + 0.48, so was paying 5.48%. I took divvies out as best as possible & moved out the corp tax component as well(left VAT alone). In addition to that I stoozed and built up around £30k at 0% interest (but normally a 1-1.5% fee back then). In addition, I had a Capital one checkbook which allowed me 0% for 60 days cash, no fee. Capital one were so stupid they sent so many of these out with no closure date that I was able to do this for 3 years. I used to write a check for £15000, pay it into my account and 60 days later they'd take it back. No brainer. I was making around £2000-£3000 savings.
In 2007 I moved, this time increasing my mortgage to £425k but keeping £175k in the offset & just increasing ISAs each year (so net borrowing of £250k), plus still utilizing credit cards. Interest rates dropped down to 0.5% so the use of the offset was negligble. So I moved the credit card money into ISAs / Bonds at a higher interest rate than the borrowing and slowly moved the offset into higher interest rates and BTL.
I now have the full 425k elsewhere earning around 5%, I pay the bank 0.98%.
So it's not a case of maximising the offset perse, it's about maximising your returns versus borrowing. If you can get higher elsewhere do so, if not offset.
When I first took it out(it was new) and at the time was priced above that of taking a fixed rate mortgage. I did the maths and calculated at the that effectively having 25% of the equity of the house in the offset made this a better deal.
I think at the time we were talking about £180k, so all I needed was £45k to be better off. Interest rates were higher at the beginning and I think I was around base 5% + 0.48, so was paying 5.48%. I took divvies out as best as possible & moved out the corp tax component as well(left VAT alone). In addition to that I stoozed and built up around £30k at 0% interest (but normally a 1-1.5% fee back then). In addition, I had a Capital one checkbook which allowed me 0% for 60 days cash, no fee. Capital one were so stupid they sent so many of these out with no closure date that I was able to do this for 3 years. I used to write a check for £15000, pay it into my account and 60 days later they'd take it back. No brainer. I was making around £2000-£3000 savings.
In 2007 I moved, this time increasing my mortgage to £425k but keeping £175k in the offset & just increasing ISAs each year (so net borrowing of £250k), plus still utilizing credit cards. Interest rates dropped down to 0.5% so the use of the offset was negligble. So I moved the credit card money into ISAs / Bonds at a higher interest rate than the borrowing and slowly moved the offset into higher interest rates and BTL.
I now have the full 425k elsewhere earning around 5%, I pay the bank 0.98%.
So it's not a case of maximising the offset perse, it's about maximising your returns versus borrowing. If you can get higher elsewhere do so, if not offset.
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