Offset Mortgages could become more popular

Homeowners with savings earning very low rates of interest could save themselves a lot of money by using their savings and current accounts to cut mortgage bills.

Offset loans have traditionally been more expensive in the UK although they have always been popular in other countries.
With an offset deal borrowers set their savings and current accounts against their mortgage.
For example a borrower with a mortgage of £175.000 and £25,000 in savings would only pay interest on £150,000. Offsetting means that the borrower will not earn interest on their savings but they will not pay tax on the savings either. They still have access to their savings if need be.
This type of loan is very attractive to high tax- payers. As long as the mortgage rate is higher than your savings rate after tax offsetting will benefit the borrower.

You may have to change your current account and transfer savings to take out an offset mortgage but this type of loan offers a great deal of flexibility. Other benefits that may be offered with the deal include overpaying and underpaying and taking payment holidays.

Always shop around and talk to a qualified mortgage advisor.

NOTE: Do not make any financial decisions based on the information on this page. Always take professional mortgage advice first

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