LONDON, UNITED KINGDOM — (Marketwire) — 08/20/12 — It-s the time of year again when parents are preparing their children to fly the nest and head to University. Following this year-s substantial rise in tuition fees, suggests a way to reduce the cost of sending a child to University by using its .
Over a 3 year course at University a student could pay GBP 27,000 in tuition fees alone. Whilst student loans are available to cover this cost it-s worth remembering that, as well as the amount borrowed, there will be interest to repay(1). As a result almost two thirds of parents are planning to save more to help contribute to University costs(2). 15%(2) of parents in the UK are hoping to cover the full cost of their child-s tuition fees and living expenses and over 30%(2) will pay the majority.
By offsetting savings held aside to pay tuition fees, parents will reduce the amount of mortgage debt which is subject to interest. As a result, for those parents who require a mortgage and have savings ready and waiting to pay for their child-s degree next year, an offset mortgage could save them nearly GBP 2,100 in just three years.
Interest saving(3)
Parents who-ve planned ahead and already amassed savings to pay for their child-s education when they go to University in September 2013 could save nearly GBP 2,100 in interest, effectively reducing the impact of tuition fees.
However, even parents whose children are matriculating this September can use the savings set aside for University fees to shave nearly GBP 1,050 in interest of their mortgage.
Ian Bartholomew, Senior Mortgage Manager at first direct commented:
“Sending a child to University can be expensive and a student loan can haunt them for years after they-ve graduated. For those parents who-ve saved money for their child-s education an offset mortgage is a great idea. Whilst the savings are sitting in their account waiting to pay tuition fees they-re also reducing the interest payable on their offset mortgage.”
The direct bank has created an and to illustrate both possible savings and reduction of mortgage term with an offset mortgage and results can be tailored to the individual-s personal situation.
Notes to Editors
(1) Student loan amounts and interest rates taken from
(2) Survey carried out on behalf of HSBC by Opinion Matters among 1,009 UK adults with children under the age of 18 between 7th and 15th June 2012.
(3) Mortgage savings calculated using the first direct 75% LTV Lifetime tracker fee free offset (currently 3.99%) on a GBP 135,000 mortgage. Over a 15 year term, with capital repayment and without any offset savings, the monthly payment is GBP 999.76, which equates to a yearly amount of GBP 11,997.12. The amount of offset savings is assumes to remain the same each year, i.e. no withdrawals are made.
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