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 Moneyfacts.co.uk shows that the average offset fixed rate has fallen further.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, 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.

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk 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.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.