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I have had a one offset mortgage account for about 5 years now and have found it to be a excellent product all round. Basically for those who dont know an offset account places all your savings/ current account into one account that "offsets" against your mortgage as interest is calculated daily this means that most of the time your paying interest on a lower mortgage sum.
So if your a tax payer your savings would have to have a high rate of interest paid to be better then keeping them offset against your mortgage
For more details see http://www.oneaccount.com. or http://en.wikipedia.org/wiki/Offset_mortgage
When originally switching my mortgage it was all done via phone and post and was not that much hassle at all, you can use any branch of Royal Band of Scotland (though its rare i ever do only really to pay cheques in) obviously it also involves switching your current accounts and direct debits they did make a minor mistake when doing this but were more then happy to reimburse me the difference.
They suppy you a cheque book, debit card and a visa payment card (this is a payment only card which defers the amount paid out by a period of up to 10 days I believe, however I have had problems with it being accepted places and found it confusing intially to get my head round what it was for).
They run a phone bank which I have used little but when I have the service has been good.
An internet banking option which I use a lot, intially the lay out of the site is confusing but once your used to it or have set it up to your liking I have found it to be a excellent site and very useful.
So the One account is for people really with some kind of savings who are good with there money (they reduce your mortgage limit yearly or as you request meaning you have to "save" the money in your account) or who regularly have a decent wage paid in, 1 year due to finacial difficulties I was not in a postion to do this and at that time it was no problem to miss that mortgage reduction.
The only problem with this account now is the postion of The Royal Bank of Scotland so depending where this goes may effect the excellent product and services
We have been very pleased with the One Account which we opened five years ago. Transfering our mortgage was a very easy process. The interest rate on our savings account was much lower than our mortgage interest rate, so it made a lot of sense to use this money to offset our mortgage. This is exactly what the One Account allows you to do. By keeping all money usually in your current account and/or savings accounts in the One Account instead, your interest on your mortgage is reduced. This saving of interest will reduce the time taken to pay back your loan. Remember no saving account will pay you more interest consistantly than your mortgage company is charging you in interest. The flexability of being able to pay off the capital of your loan can also further reduce your overall interest payments. A paper statement is sent once a month and we can access our account online at any time. The website to use our account online is easy to use and provides detailed information about transactions and forecasts. It was difficult to set up a standing order online, although this was over a year ago and this service may have improved. When we phoned the helpline, staff were competant, polite and able to set up the standing order very quickly. Money and cheques can be paid in at RBS branches, or cheques can be posted in pre-paid envelopes. Overall the best move we have made with regard to our finances for many years.
Had you asked me a year ago what I thought of the One Account, I would not have hesitated to say it was an excellent product.
In addition to the whole concept of an 'offset' account suiting us financially, the customer service provided by the One Account was excellent.
The phone line was always promptly answered and very helpful. The monthly statements were really informative, providing full details of money going in and out, as well as a graph to show the rate at which your liabilities were reducing or increasing and whether you were on target.
I have always banked with the Royal Bank of Scotland and as far as I was concerned, I was continuing to do so.
Unfortunately, in the last year this level of service has not been maintained. When other mortgage rates were going down, ours went up. Most recently, when there were two significant drops in interest, these were not initially passed on. No explanation was given, other than a recorded message on the phone line saying that the matter was being considered and they would get back to us when they had any news.
Over a month went by, before a campaign by disgruntled customers through websites and the press led to the rate cuts being in part passed on.
During all this it was clear that RBS were treating One Account customers differently from its other customers. It had gone to the press saying the rate cut would be passed on in full to its customers, and yet it was making an exception of the One Account.
Its explanation for this difference in treatment was that the One Account used to be owned by Richard Branson's Virgin Company and therefore, even though they had taken it over, it was not strictly part of their company.
As I have already stated, they did eventually bow to public pressure and passed on part of the rate decrease. But it was only after a hard fought campaign.
These are difficult times and no one really knows what is in the future. I think many of us would have understood that the offset mortgage is perhaps a higher risk product. This was not a tracker mortgage after all. However for the RBS to have dealt with the matter in such a suruptitious way as just lost them alot of good will.
I never considered that I held any brand loyalties, but I realise now that I was 'wedded' to RBS. I had been with them a lond time and trusted them.
This is sadly no longer the case.
In 1997 The Royal Bank of Scotland and Virgin Direct formed a joint venture and marketed "The Virgin One" to Virgin Direct's 200,000 customers and it was an immediate hit and so in 1998 it was marketed to the general public for the first time. Since then it has continued to be a huge hit. In 2003 it became known as "The One Account" and Virgin were no longer involved. From the regular TV ads and poster campaigns most people will have heard of the name but may not know exactly what it is.
Web site is www.oneaccount.com.
***What Is It?***
An account that brings together your mortgage, savings, current account, loans and credit cards and operates all these through one account. It works like a normal bank account with a cheque book, debit card, credit card (VISA), direct debits, standing orders and pay ins. A point to note here is that the VISA is not an official credit card and therefore you do not get payment protection afforded by standard credit cards. It is unclear why but must be something to do with the legalities of the account.
The idea being that you can manage all your finances under one account, make your money work harder and actually reduce the amount of interest you pay over the term of the facility by off setting your savings against your borrowings as well as reducing the repayment term. What's more you only pay one interest rate on the net balance of the account.
Anyone can go to the web site to get a quote on how to shrink their mortgage based on your individual circumstances. Just click on "mortgage shrinker" via the above link and fill in the questions which takes less than a minute to complete. You will be amazed at the figures and if not then you will be no worse off.
In our case it promised a saving of £88,000 over the term of the mortgage whilst shrinking the term from 20 years to 16. All through using your savings to offset the balance. It all looks very good and convincing but in truth I was still a little skeptical but felt that in the absolute worst case we will be no worse off so decided to give it a try. We have now just passed the first anniversary of having the account and thought it worth sharing the experience and thoughts.
The One Account borrowing is secured via a charge over your property and is repayable in full at an agreed future date before your retirement (if you have not already repaid it by then!!).
You can obtain quotes for home insurance/life cover although I have never done this.
Similarly, they offer a Plus One scheme whereby they have negotiated exclusive offers with companies like RAC & Virgin, including discounts on mobile phones, wine, holidays and music etc but again I have not taken advantage of this.
The mortgage is portable should you move home and they have a team of experienced staff available to talk you through the process.
***How To Apply***
The One Account is available to first time buyers, re-mortgages or if you are moving home. All applications are on line via the above link. This was very easy and took probably 45 minutes. It was detailed in terms of the questions asked about income/house value etc etc so be prepared. At the end if gives you an indication as to whether it has been agreed and we received a formal confirmation by phone of the facility being agreed within 24 hours as well as written details in the post. This then set off a chain of events to transfer both our mortgage and direct debits/standing orders.
When applying you ask for a facility amount and if agreed, throughout the life of the facility you can draw up to this amount even if you have paid large chunks of the loan off. This can be very flexible in times of need ie, special one off purchases or rainy day fund but you need to be disciplined.
Each part of the chain sets off another chain of events ie, by signing and returning the formal offer means you then pay the valuation fee, which then books a valuer to visit etc but at all times you are informed at exactly where things are up to by post. Every time something happens you get a letter and at all stages you know exactly where things are. If you have any queries you can phone the staff (UK based) who were very knowledgeable and helpful. During this time they are also contacting your direct debit originators to change bank details (in fact the biggest delay was waiting details of all direct debits and standing orders from our existing bank).
From starting the process to actually repaying our existing mortgage took six weeks although we were actually on holiday for two of these which delayed things so it could have been done quicker.
***Rates & Fees***
Interest rate is staggered depending on your loan to value from 6.6% below 50% LTV to 7.45% for 99% LTV. It is a flexible rate (cannot be fixed) so if interest rates rise/fall then so does your borrowing cost but that is no different to a standard mortgage. If your net balance is in credit then you receive interest at 1.5% gross which is pitiful but in this scenario you would surely move your savings to a different deposit account.
You will pay the valuation fee £250 (up front) plus legal/arrangement fees of around £500 (added to loan). However, the total fees depend on individual circumstances.
***Managing the facility***
This is done on-line and you are provided with a Global Key Code for logging on together with your own password and pass-code. Logging on is easy for anyone familiar with on-line banking. At first log in you are given the option of logging into the "Blue World" which is a standard, simple view or "Multi-Coloured World" which enables you to personalize the view and include all sorts of graphs and also manage e-accounts (see later). You can default either of these views so when you log in it goes to your desired view automatically.
Once logged on (I have only ever use the "Multi-Coloured World") you are taken to your account main page which gives an overview of where your account balance is at. This shows the balance, recent transactions and various graphs to see how much in front of your original repayment guide you are at and the savings made. You can play about with this page to see various views by default so it is very much a personal choice as to what you see. From here you are then able to drill down into whatever you like really in terms of recent statement, pay a bill, make an ad hoc payment, view credit card transaction/standing orders/direct debits etc and also, if you are so inclined, you can break down each individual transaction into a category via the tools option ie, shopping, night out, car parking etc so you can produce a report on where you spend and what on. I have not used this however, as I personally don't see the need but it's there if you want to.
What the "Multi-Coloured World" also does is give you an opportunity to separate out the various elements of The One Account ie, into mortgage, current, savings etc. This is by setting up an e-Account. This is not a physical account but a look at how the one account is made up. This is not something that appears automatically and is something you need to do yourself but it can be useful. For example, if your balance is £100k then this may be £120k e-mortgage, £15k e-savings and £5k e-current account in credit and some people like to see it this way to see how it is made up rather than just seeing one balance. Personally the one balance looks fine to me but my wife breaks it down (for a joint account you have separate log ons and your view is purely individual so we both see the same net balance but have different views of it depending on personal preference). It is fair to say that initially this is very confusing and it does take time to get used to it but you need to be patient.
In essence, it offers everything on-line that standard on-line banking does with a few added extras that can be personalised.
What I like about both the on-line system and paper statements is that you see straight away how far ahead of your initial projections you are in paying your mortgage off and it gives you some motivation to try and pay it off even earlier.
The web site you use to obtain a quote is very obvious and easy to navigate however, the on-line banking site is not very well laid out at all. It can be confusing and garbled and not obvious what buttons to click to see, for example, a list of standing orders. It is listed under a payments button instead of simply having a button that says "standing orders". Any ad hoc payments are shown in a list with an option to arrange a payment near it. Unfortunately, the option is not sufficiently spaced on the view to show whether it is an option for the payment above it or below it and a few times I have set up a payment to the wrong place but noticed before I saved it. Despite having done dozens of payments I still get this wrong sometimes and you have to be very careful. It would be much easier if they simply had a line under each one to show where one finishes and the next one starts. Similarly, when you do set up a payment the final act is to save it but again this is not obvious as the save button is hidden below the screen and you have to scroll down to see it. If you go to another page without saving it you do not get a warning so you think you have made a payment when in fact you haven't. These are only small things and more irritable than annoying but you would think they could make it easier.
* If you have savings then you will undoubtedly save money over time (and you are effectively getting at least 6.60% tax free on your savings).
* You will shrink your mortgage repayment date.
* All your finances are under one account for ease of managing them.
* The application and transfer process is simple.
* Everything can be viewed online in a personalised view and you do get paper statements monthly.
* The staff are very helpful and knowledgeable both during the application process and once you become a customer.
* Enables you to fund one off major purchases, home improvements, university fees or pay for special occasions etc without the need to take out an additional loan.
* If you are ill or lose your job it can provide flexibility until you get back on your feet.
* If you do not have savings or surplus cash then it's not for you.
* The interest rate may be slightly higher than the market norm but this is cancelled out from the savings made.
* The web site can be confusing until you get used to it but you can personalise it.
* Any payments by VISA are debited to your account weekly on a Wednesday so you are paying for credit card purchases much earlier than with a standard credit card (but at a cheaper rate).
* The VISA is not an official credit card and so you do not get payment protection. As a result I do not use it. It is actually much easier to use a normal credit card and pay the balance off in full so that interest charges are not accrued.
* You need to have strict financial discipline to not get carried away with your spending.
* You have to repay any outstanding balance on a future agreed date before your retirement which, if you have been indisciplined, could cause you a major heartache at that time.
The application and transfer processes were very easy - much easier than I expected which was a major worry beforehand as you don't suddenly want to find out your council tax payment has gone astray. The staff are very helpful, know precisely what they are talking about, are UK based and work with you throughout the transfer process whilst keeping you fully up to date at all times.
Would I recommend this? Absolutely, but not en masse to everyone. This is very much a tailored financial solution but it will not be to everyone's taste or benefit. I would certainly not recommend this to anyone who does not have financial discipline because spending could very easily get out of control. However, if you are disciplined and have surplus balances in your current account throughout the month then over time this option will almost certainly save you both money and reduce your mortgage time period.
I also find that I can become fixated almost to the point of obsession about looking at how far ahead of target we are and if we have slipped back I want to know why and the various filters & tools can show you quickly where you are spending money. It certainly drives me on to reduce our mortgage as quickly as possible whereby when we had a standard mortgage any surplus balances would just be sat in the bank account earning peanuts. It is only through having The One Account that I can see how much we have missed out on saving in the past. Now I am 100% guaranteed that our savings are working for us.
It's not perfect and certainly not for the faint hearted who could allow things to go out of control but in the right circumstances this product will certainly work to your advantage.
I found it very difficult to rate this product because there are so many different elements to it. Based on the savings it would have to be five stars but I have given it four stars overall as the on-line banking view and sometimes confusing navigation brings the score down a little.
Is this The One for you?