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Mainstream mortgage borrowers can now save themselves thousands of pounds with providers opening up the market for cheap offset mortgages, according to experts.

Offset mortgages work by deducting any savings or current account funds from the overall cost of the mortgage loan. Interest is only paid on the final balance, which potentially means that homeowners can pay off their mortgage more quickly.

So, someone with a 100,000 mortgage, 9,000 in savings, and an average of 1,000 in their current account, would have a mortgage debt of 90,000.

New products such as introductory rates of less than five per cent and ongoing rates within a point of base rates have made offset mortgages more affordable for more homeowners.

Ray Boulger, senior technical manager at mortgage broker John Charcol said: “The concept of offsetting is brilliant but until now has always come at too high a price to be good value for most borrowers.”

“Offsetting is la creme de la creme of flexible mortgages, combining full flexibility with maximum convenience. Getting maximum value from offsetting is about convenience of using the facilities as well as a market leading rate.”

However, there are disadvantages to the scheme as linked savings and current accounts do not gather their own interest and some people might find it more profitable to plump for a market-leading mortgage coupled with a market-leading savings account.

This also gives the borrower the option to transfer their savings or mortgage to another provider without any additional complications.

Fewer first-time buyers are now getting on the property ladder than at any other time during the last 25 years, new research claims.

The average homebuyer is now 33 years old and has saved for five years to get together a deposit of 24,000, according to the Halifax.

Some 320,000 people bought their first home last year, ten per cent down on 2004 and 40 per cent lower than in 2002.

The report also found that first-time buyers could not afford a semi-detached property in some 87 per cent of towns in the UK, compared to 41 per cent in 2002.

Only half could stretch their finances to cover the cost of a terraced home, up from a quarter three years ago.

The cost of deposits has more than doubled from 9,894 in 2000.

London and the south-east remained the most expensive places to buy a home with Gerrards Cross in Buckinghamshire topping the tables. The average price of a home in the town comes in at almost 18 times the average income of a first-time buyer.

Up north, Nelson in Lancashire proved the cheapest place for first-time buyers with the average property costing 3.3 times the average cost of their salary. Lochgelly in Scotland and Gosport in Hampshire were also affordable.

Scotland and the north of England proved the only places where homebuyers can still snap up their first home for less than 100,000.

Those looking in London shell out an average of 222,005 whilst those in the south-east spend 163,253. Across the country the average spend now comes in at 137,122.

One in three homeowners would be better off switching to an offset mortgage, new figures show.

These allow homeowners to offset the money in their current and savings accounts against the cost of the home loan. They then only pay interest on the balance, thus making smaller repayments.

Intelligent Finance estimates that a third of households would save over 300 a year by moving to an offset tracker product.

Last year, around a quarter of homeowners would have benefited from making the move.

Nick Robinson, managing director of Intelligent Finance, said: “Datamonitor has revealed that the offset and current account market grew by over 63 per cent every year between 2000 and 2004 and predicts that these products will account for 30 per cent of all UK secured lending by 2009.

“One of the main reasons for this growth is likely to be a greater understanding amongst brokers and clients on how offset can provide benefits.”

Consumers thinking of buying a holiday home in the sun or planning to retire to foreign shores need to consider the different rules and regulations for mortgages and properties in different countries, according to an industry specialist.

The Association of Mortgage Intermediaries (AMI) has launched a fact sheet to help homeowners thinking of setting up a new place abroad for fun or for good.

Issues to be aware of, according to the AMI, include the currency difference, paying for the property and legal issues as the house will be subject to the country’s laws and not just the usual property regulations.

Other considerations include insurance protection, transferring money into a foreign country, the health system of the country, setting up a bank account and what level of local taxation needs to be paid.

“An increasing number of UK residents are buying property abroad, be they holiday homes, future homes to retire to or as buy to let investments. There are many considerations for mortgage intermediaries when advising their clients on such a purchase and they must take great care to ensure the process goes as smoothly as possible,” said Rob Griffiths, associate director of AMI.

“The key point that should be remembered is that buying abroad is different to buying in the UK. In different countries there are different laws regarding property and mortgages, and there will be differences in practices, customs and local regulations.”

Mortgage arrangement fees are on the up with some lenders now charging homebuyers different amounts for the administration work based on the size of the home loan being offered.

In some cases the fee is payable up front but if the sale does not proceed for whatever reason then some homebuyers will find themselves out of pocket.

The lender may also offer to add the fee to the costs of the loan, but in such instances the overall size of the mortgage increases mean that the borrower will have to pay a larger amount of interest.

Rachel McKay, mortgage analyst from moneyfacts.co.uk, said: “Lenders margins are getting ever tighter and consumers are more likely to switch lenders to obtain the best deal these are the reasons that fees are increasing.

“If you think about it, with the advent of new technology and a paperless office there should be less work involved for lenders and the cost should really be reduced accordingly.

She added that high property prices coupled with the fees being set at a percentage of the mortgage rather than a flat fee would prove expensive for homebuyers.

“The size of the loan should have no bearing on the administration time involved in a mortgage application as long as the LTV [loan to value] and income multiples fit the lenders criteria, Ms McKay concluded.

Homeowners could collectively save themselves 850 million by making the move to offset mortgages, according to new figures.

A quarter of borrowers could save themselves 370 on the cost of repayments in the first year alone, according to calculations from Intelligent Finance.

Offset mortgages work by deducting the value of a customer’s savings and current account from the cost of their loan.

This could benefit homeowners with as little as eight per cent of the value of their mortgage in savings. In fact, offsetting 10,000 in savings against a 100,000 mortgage could produce savings of 20,177.74 over the term of a mortgage.

The figures also show that the higher a household’s income the more likely it is to benefit from an offset mortgage. Almost half of homes with savings equivalent to three times their monthly income could also save themselves money.

Nick Robinson, Intelligent Finance managing director, said: “While offset mortgages are growing in popularity, many people find it hard to quantify the potential benefits they can offer – yearly savings, flexibility, and tax benefits, to name but a few.

“This research puts to rest the myths surrounding offset, while revealing that millions of people in the market for a mortgage could be better off offsetting.”

Three in five people who hold a building society savings account would find that an offset mortgage could save them money within the first 12 months whilst almost one in two people with an ISA would find themselves better off by the end of year.

Many Brits are confused when it comes to sorting out a good deal on their mortgage, a new study says.

Research from John Charcol found that almost a third are unclear on which rate they base their decision to take out a mortgage on, whilst 11 per cent of homebuyers choose a mortgage based on the headline rate.

A third of borrowers make a choice based on the annual percentage rate (APR). This could be a sensible move if they plan to keep their mortgage for its full-term but many people now stick with a mortgage for an average four years before switching, says the company.

Ray Boulger, senior technical manager at John Charcol, says people are in danger out putting themselves out of pocket by choosing the wrong mortgage for their needs.

“Using a comparison tool that is normally calculated on a 25-year term, with typically between 80 per cent and 92 per cent of that term based on a standard variable rate (SVR) which most borrowers will only pay for a short period, is guaranteed to mislead the majority of borrowers who will either remortgage shortly after their initial deal has ended or will take a new rate from their existing lender.”

Mr Boulger added that it was important borrowers fully understand everything about the product they are buying and called for more consumer education.

“However, this will only be true if that education focuses on the fact the APR should not be the paramount consideration for the vast majority of consumers as far as mortgages are concerned, unless the rules are changed so the way APRs are calculated are relevant to the modern mortgage,” he added.

Consumers are still being ripped off when it comes to mortgages, a leading building society claims.

Nationwide Building Society says that people end up paying far more than they should for their mortgage deals even with recent regulations to make policies clearer.

A year ago, all mortgage lenders and over 70,000 advisors came under the watchful eye of the Financial Services Authority.

This so-called M Day saw the introduction of Key Fact Illustrations (KFIs) to highlight product information such as terms and conditions and arrangement fees. It also means that advertisements could not mislead customers with hidden extras in the small print.

But this regulation has also made it more time consuming for consumers to shop around.

However, Nationwide is advising mortgage hunters to avoid extended redemption mortgages and those which come with insurance products as well as lenders who reserve their best deals for new customers only.

Consumers also try to stay away from higher lending charges which can add 1,500 for those who borrow more than 90 per cent of the value of their property. This was paid by around 50,000 first time buyers in 2004.

Nationwide also says that it is cheaper to pay daily interest rather than annual but should ensure that the lender is charging a low interest rate.

Stuart Bernau, Nationwide executive director, said: “Dont be fooled by an initial low interest rate that has extended redemption penalties. Rarely, if ever, does the benefit received from the low initial rate outweigh the burden of the higher rate at the end of the period, so be careful!

“In addition to checking the fees detailed in the KFI, borrowers should also ask for full details of the range of fees charged by the lender,” he added.

The housing market slowdown continued in July, new government statistics published today show.

New house price figures for July from the Office of the Deputy Prime Minister point to a year-on-year increase of just four per cent ? a percentage point down on the annual growth rate recorded in June.

The picture was more mixed across the country.

In England, the average growth rate slowed from 4.1 per cent in June to 3.1 per cent in July; in Wales the rate fell from 10.8 per cent to 7.6 per cent; and in Scotland it fell from 14.0 per cent to 12.0 per cent.

However, Northern Ireland’s property boom shows no sign of coming to an end, with the annualised growth rate for July rising from 14.2 per cent last month to 15.9 per cent.

Indeed, Northern Ireland’s market would still look to have plenty of life left in it. The average house price in Northern Ireland for July was 133,849 ? cheaper than the cheapest English region, the north east, where the average stands at 134,034.

But Wales is still the cheapest place to live in the United Kingdom, with the average house price being 127,945.

More so than usual, views on where the market goes from here are mixed.

Last week, two of the UK’s biggest mortgage lenders released conflicting assessments of August’s performance.

August is prime time for the housing market, with sales historically up during the sunny summer months. Added to that, there was the lure of cheaper mortgages, when the Bank of England cut interest rates by a quarter of a per cent on August 10.

Halifax’s monthly survey was positive, recording growth of 1.6 per cent for the month, but Nationwide claimed that rate of growth had fallen again, by 0.2 per cent.

On Saturday, the Financial Times’ house price index, which measures prices achieved by sellers on sales, put August’s rate of growth down 0.1 per cent on the previous month, at just 3 per cent.

That is the sixth consecutive month of decline, according to the FT.

Academetrics, who compiled the FT survey, warned that prices are “likely to fall further still”.

With four of the nine members of the Bank of England’s Monetary Policy Committee voting against the August rate cut, and the industry split on what is happening in the market, it is little wonder that the public is just as confused.

A survey published today by Propertyfinders.com showed 48 per cent of respondents still hopeful of rising prices over the coming year, and 45 per cent anticipating decline.

23 per cent believe that interest rates will soon start going up, compared to just 14 per cent last month.

The MPC held base rates at 4.5 per cent when they met last week.

47 leading analysts were polled by news agency Reuters ahead of the MPC’s announcement last Thursday.

Every single one predicted that the Bank would keep rates at August’s levels.

At least some people remain able to predict what is on the horizon for Britain’s homeowners.

Many UK teenagers believe they will be stepping on the property ladder before they are aged 27, despite the increasing cost of property.

A new survey by IFA Promotion discovered that 83 per cent of teenagers are confident that they will become property owners, with 56 per cent believing that they will secure their first property between the ages of 23 and 27.

However, the growing cost of homes in the UK is likely to make homeownership very difficult, especially as the average house price now stands at close to 200,000 with around 5.8 million adults admitting they are unable to afford their own home.

Just eight per cent of teenagers raised some doubts that they may not be able to become a property owner and acknowledged that they are likely to be priced out of the market.

Karen Barrett of IFA Promotion commented: “The British obsession with owning your own home clearly starts young but the unrealistic expectations are coupled with a shocking lack of knowledge about the home buying process.”

He added: “Eighty per cent know nothing, or little, about buying a property or mortgages.”

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