Offset and online champion gets a big thumbs-up

First Direct

The winner of the mortgage category has always prided itself on being different. First Direct pioneered stand-alone telephone banking and offers customers the choice of telephone or internet for its range of financial services.

But it has also championed the offset concept, which allows customers to reduce the interest they pay, or pay off the mortgage early, by offsetting credit balances in their savings and current accounts against the mortgage loan, and only paying interest on the difference. First Direct launched its first offset mortgage three years ago and has since lent more than £4.5 billion.

However, across all products, First Direct likes to differentiate itself through what it calls 'legendary' customer service. It may have introduced the notion of 'remote banking', but it has concentrated on treating each customer with a human touch via the phone or through the internet. Readers have recognised these efforts as, when voting First Direct as the winner in the mortgage category, they reported a considerably higher degree of satisfaction than with its nearest competitors.

The bank's aim is to offer market-leading service, value and flexibility. It says it achieves this by giving customers access to their mortgage information 24 hours a day; offering competitive interest rates; and providing total flexibility in its mortgages by allowing unlimited overpayments, payment holidays and no redemption penalties. The bank says customers can get a mortgage approval in principle and book a valuation online or over the phone.

First Direct claims to have had the most satisfied banking customers in the UK for the past 12 years and to have been the UK's most recommended bank over the same period - a boast backed up by researchers at MORI. In addition, the bank has come top in the monthly Virtual Online Banking Survey survey in two of the past four months.

Maintaining this level of satisfaction is extremely important to the bank's chief executive, Alan Hughes. 'We work extremely hard to keep our customers so happy that we are recommended every five seconds,' Hughes says.

Hughes is a fan of the offset mortgage concept. He adds: 'Customers can keep hold of their finances and make every pound count because every penny in their day-to-day savings and current accounts helps reduce the interest on their loan. This helps customers pay off their mortgage quicker and for less, and it is flexible so you can change it to suit you.'

The popularity of offset is increasing. According to the Council of Mortgage Lenders, around one in 10 new mortgages is now offset, and this percentage is expected to rise to 20-25 per cent over the next few years.