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RENTING out a roos m can cut 29 months off the repayment period of an offset mortgage, says online bank first direct, which has launched a range of new offset mortgage deals.

By renting out a spare room for five years, says the bank, a homeowner with an offset loan who puts monthly rents into mortgage overpayments saves a four figure sum in interest.

Under the Government's Rent A Room scheme, income from letting a furnished room up to pounds 4,250 per annum is tax free, so homeowners with space to spare can earn an extra pounds 354 per month.

Anybody making monthly overpayments at this level for the full five years on first direct's three-year fix (currently costing 3.49%, with pounds 499 booking fee and a loan to value limit of 65%) would save pounds 1,028 in interest payments and repay their loan 29 months earlier.

Richard Tolchard, first direct senior mortgage product manager, says: "As long as all necessary precautions are taken, a lodger is an easy way for homeowners to earn cash and cut their mortgage term.

"The added benefit of first direct's flexible offset is that if homeowners need access to money they've overpaid, they can redraw up to the original amount of the mortgage borrowing."

Canny savers should check out bonus rates payable on easy access savings accounts, where rates on the top 10 accounts are at their highest since March 2009 with a current average rate of 3.09%, says moneysupermarket.com.

Although the base rate has not moved for 30 months, savings rates have been rising, with top rates now over six times the current base rate. The new WeBSave 3 easy access account from West Bromwich BS pays 3.17% AER, pushing the average top 10 easy access rate to 3.09% (against 2.71% in September 2010).

The rise reflects banks and building societies offering bonus rates to savers, which typically last a year.

All the top 10 easy access accounts currently include bonus rates, compared to three out of 10 in March 2009.

However rates can fall sharply when bonuses expire - so savers must be ready to switch their cash if necessary.

Some easy access accounts limit the number of 'free' withdrawals - penalising savers through loss of interest on additional withdrawals.

Kevin Mountford, head of banking at moneysupermarket.com, says: "With the base rate set to remain low for some time, savers must squeeze the most value possible from their savings pots."

In a boost for savers is the Skipton BS E-Bond, has increased the rate on one-year accounts raised from 3.40% to 3.45% The Society's E-Bonds offer customers the chance to benefit from good returns over six months and one, two, three, four or five years.

Minimum investment for each product is pounds 500, to a maximum of pounds 1m (pounds 2 million for joint accounts).

Kris Brewster, Skipton BS head of products, says: "Our E-Bonds are a consistently popular choice.

"Customers like the combination of simplicity and competitive rates.

"We adjust our product range to keep it among the most attractive available.

"Customers can squirrel money away in the knowledge it's working hard."
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Title Annotation:Features
Publication:Western Mail (Cardiff, Wales)
Date:Sep 17, 2011
Words:530
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