An Offset Mortgage simply allows you to set the balance of a savings account you might have against the outstanding loan balance when calculating interest charged on your mortgage.
If you have surplus savings then this has several advantages. First of all, with interest payable on savings currently so low, any interest you save on your mortgage is likely to be much more than any interest you might receive on your savings. Furthermore, the interest you receive on your savings, unless they are in an ISA, will be taxable, thus reducing this sum even further at your marginal tax rate, whereas savings in mortgage interest are not taxed. You will receive the entire benefit.
Example:
£200,000 mortgage
4.94% fixed offset rate 5 years
30 year term.
Saving £500 per month over the five years could save you £1,367 in interest
Saving £500 per month over the term will clear your mortgage at year 20 (if interest rate remains the same) saving you £166,239 in interest.
(calculation completed January 2025).
Some offset mortgages will even let you set other accounts against your mortgage balance when calculating interest. If your partner or perhaps your parents have savings that they are willing to associate with your mortgage then they can still draw down on their savings as they wish but your interest liability will be reduced accordingly. Of course, they are forfeiting their interest which whilst this may not be painful when savers are receiving such low returns, may become an issue when rates rise.
The big advantage to offset mortgages is that you can retain flexibility, Perhaps you want to keep £30,000 in savings just in case you lose your job or need to pay a large bill, but you’d like to reduce your interest liability whilst the cash stays in the bank. The self employed find the offset mortgage attractive for this reason.
It is worth noting that offset mortgages may incur larger charges and higher interest rates, so you must consider the package as a whole when comparing your options.
For more information contact us or call 01628 507477.
Recent posts
The Financial Conduct Authority (FCA) has shared new changes to mortgage rules with the aim to simplify remortgaging, and encourage competition within the mortgage market.
Lloyds boost lending for first-time buyers
5 days ago
Lloyds Banking Group has jumped on the bandwagon to boost lending for first-time buyers as they allocate an additional £4 billion to help first-time buyers on to the property ladder.
As the Loan to Income (LTI) cap has been increased to 5.5 times income, applicants who fit the First Time Buyer Boost criteria could borrow up to 22% more.
The government is introducing mortgage reforms to boost homeownership, stimulate economic growth, and make the housing market more accessible, especially for first-time buyers.
Chancellor Rachel Reeves has announced the most significant mortgage reforms in over a decade—great news for those dreaming of homeownership.
Nationwide ease their ‘Helping Hand’ mortgage designed to help first-time buyers get onto the property ladder by allowing them to borrow up to six times their income.
Ways to save money over the summer holiday
14 days ago
Keeping the kids entertained over the six-week summer holidays isn’t always easy, especially with the cost-of-living making it even more difficult. Below is a list of fun, inexpensive ideas to do over the break
The Financial Conduct Authority (FCA) has published a discussion paper about the future of the mortgage market in a bid to improve access for first -time buyers, self-employed, and those borrowing in retirement.
Ever wondered where the most reasonably-priced towns for families to buy are? Property company, Zoopla has identified the top 10 towns for families to live in the UK by looking at the most affordable towns, and how many people are looking in that area.
Increase in zero-deposit mortgages in 2024
18 Jun 2025
There was a 32% increase last year in 100% loan-to-value (LTV) mortgages which are mortgages that require zero deposit. According to a recent report by chartered accountants and business advisers, Lubbock Fine, the reason behind this is buyers simply struggling to save enough for a deposit.
More information
Trusted by
