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Offset Mortgages

An offset mortgage allows you to offset your savings against the amount you owe on your mortgage, reducing how much interest you pay.

What is an offset mortgage?

An offset mortgage can allow you to balance your savings against what you owe on your mortgage and can be a popular choice with homebuyers.

An offset mortgage links your savings, and in some instances your current account, to your mortgage. So instead of earning interest on your savings, you save paying interest on part of your remaining debt.

This can be worthwhile because the interest charged on a mortgage can outperform what is earned on a savings account.

How does offsetting work?

If, for example, you had a £200,000 mortgage and £30,000 in savings offset against it, you would only pay interest on £170,000.

For example if your mortgage rate is 2.5%, instead of paying, 2.5% interest on £200,000 (£5,000) in a year, you would pay 2.5% on £170,000 (£4,250) - a saving of £750.

A £30,000 savings account earning 1.5% would yield £450 in a year. So the net saving would be £750 off the mortgage less the £450 lost savings interest - leaving you £300 better off.

What types of offset mortgage are available?

As with standard mortgages, there are both fixed interest and standard variable interest rate (SVR) offsets. Fixed rate options can be more popular and typically make up the majority of offset mortgages.

Offset flexible mortgage at a glance

With an Offset mortgage, you can link your savings and current account balances to your mortgage and only pay interest on the difference between those accounts and your mortgage balance.

  • Link your savings and current account balance4
  • You will always have access to your savings
  • Save on mortgage interest, the interest you save reduces your mortgage balance