Research from Accord Mortgages indicates that many borrowers may not be benefitting from an offset mortgage due a lack of understanding of they how they work.
The findings of the survey suggest there is an opportunity for lenders and intermediaries to raise more awareness about the advantages of this type of home loan to borrowers.
The survey commissioned by the intermediary-only lender showed that 94% of brokers questioned believe a better range of tools from lenders could help them to dispel client misconceptions about offset mortgages.
Better online tools, and more case studies and detailed key facts illustrations (KFIs) were cited as the best ways to achieve this by respondents.
23% of brokers questioned found explaining offset mortgages to clients challenging, whilst 12% admitted to having limited knowledge of this type of home loan.
Whilst brokers acknowledge the present economic conditions are ripe to reap the rewards of an offset mortgage, the findings show this is not translating into business: 83% of respondents agreed that offsets give borrowers a chance to capitalise on the current low interest rates on savings, but 41% of brokers said they dealt with no more than two offset cases last year.
Further separate research conducted by the Yorkshire Building Society Group confirmed that awareness and understanding of offset mortgages is limited amongst self-employed or contractor workers, one of the key groups that could benefit from the flexibility and tax advantages this type of mortgage provides.
29% 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.
And only 10% of those who said they were familiar with this type of home loan actually had an offset, despite the majority (63% of all respondents) indicating they would like to pay off their mortgage as soon as possible, or they want to make their money work harder.
The research also showed this particular group of borrowers had a number of misconceptions about offset mortgages. For instance, some believed they would not have access to their savings, whilst others didn’t realise they could also reduce their mortgage term or their monthly repayments.
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% 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.
“At Accord we’re committed to helping brokers meet their clients’ needs, and we aim to make their job as easy as possible. We recently launched an interactive online toolkit called Client Hub which includes extensive guides and animations that brokers may find helpful when explaining the benefits of an offset to clients.”
Brian Murphy, head of lending for Mortgage Advice Bureau, added: “Accord’s research suggests that a little over a third of the self-employed borrower group surveyed arranged their mortgage via a broker. This is in stark contrast to the fact that more than two thirds of all mortgages are arranged via the broker community.
“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.”