Chelsea raises stakes with offset options

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Competition among mortgage lenders intensified this week as Chelsea Building Society entered the offset market.

The lender said offset options, where a borrower’s savings are set against their mortgage debt, are being made available on all its standard mortgage range.

Chelsea is offering a choice of loan to value (LTV) tiers, fixed and tracker options, and selection of terms.

By linking a mortgage and a savings account, instead of earning interest on the savings the borrower offsets them against the mortgage debt, meaning they just pay interest on the remaining balance.

Savers have struggled to find a real return on their cash as the Bank of England maintains its historic low base rate.

Deals Chelsea is offering include a 2.49 per cent two-year fixed mortgage offer at 70 per cent LTV with a £1,495 fee, and a 3.39 per cent five-year fixed rate at 70 per cent LTV, with the same fee.

MoneySupermarket released data last week showing fixed two-year mortgage deals generally had reached a record low.

Leeds Building Society recently fuelled the price war by launching its lowest ever two-year fixed rate mortgage, at 1.99 per cent, available at up to 75 per cent loan-to- value.

Last month the Post Office slashed rates on a range of ‘first-time buyer friendly’ products.

Borrowers have benefited from a raft of rate cuts in recent months because the Bank of England’s base rate is expected to remain at 0.5 per cent until 2013.