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An Offset Mortgage Could be a Saviour for Savers

Housing-Market / Mortgages Oct 04, 2016 - 02:14 PM GMT

By: MoneyFacts


Borrowers with a separate mortgage and savings account are currently faced with rock-bottom savings rates, meaning they get little return for stashing their cash. By combining the two products into an offset mortgage, borrowers will not only be able to reduce the size of their mortgage, but save thousands of pounds in mortgage interest. They could be particularly beneficial at present, as research from shows that the average offset fixed rate has fallen further.

Charlotte Nelson, Finance Expert at, said:         

“With interest on savings accounts dwindling, it is a difficult time for many savers. However, those who have a mortgage could look elsewhere to see if their nest eggs can work even harder for them; an offset product could provide a genuine alternative. For example, based on the average two-year fixed rate for an offset (2.02%) and non-offset product (2.38%), a borrower would save £742* in just one year years and shave a year off the term of their mortgage.

“With competition high in the mortgage market, providers are keen to stand out from their competitors by showing they offer a diverse range of mortgages at great prices, and offset products only enhance their offerings further.

“An offset mortgage is the ultimate flexible product, as it allows borrowers to reduce the interest paid on their mortgage while simultaneously having instant access to their savings pot. Despite the Personal Savings Allowance firmly in place the tax benefits an offset mortgage is still a consideration for many. The reductions in the average offset fixed rate and price are only going to boost its appeal.

“However, when mortgage rates have reached their low point, borrowers should keep in mind that there could be better deals out there. For instance, the lowest five-year fixed deal at 75% loan-to-value is priced at 2.05%, 0.23% less than the lowest five-year fixed rate offset deal. Borrowers looking to get the most out of their savings will therefore need to decide carefully whether the extra flexibility is worth paying for.”

*Based on £150,000 mortgage amount over 25 years and £10,000 savings pot. - The Money Search Engine is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

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