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Offset Mortgage

An offset mortgage gives you the ultimate flexibility with your mortgage, but what are its benefits, who should consider using this type of arrangement, what are the risks involved?

offset effect

What are the benefits and risks of an offset mortgage?

Offset mortgage benefits

  • Cash flow – also have cash available instantly. Pay funds towards your mortgage debt yet be able to call on them when you need them
  • Flexibility – pay more when you can, less when you need to, pay lump sums, drawback lump sums
  • Savings – make massive savings on interest costs over the term of your mortgage
  • Protection – protect your lifestyle against the unexpected by keeping cash to hand

Offset mortgage risks

  • You need to be disciplined in managing your mortgage, or you may find yourself with a debt you struggle to repay at a later date.

An offset mortgage means you can:

  • Repay your mortgage in a way that works for you
  • Benefit from a massive reduction in mortgage interest costs due to the effect of offsetting

Use offsetting to strip years off your mortgage

Offset mortgage rates

Accord Offset Mortgage Rates

  • 5 year fixed offset mortgage 5.95%

Barclays Offset Mortgage Rates

Tracker offset mortgage rates only from 6.47%

Coventry Offset Mortgage Rates

  • 5 year fixed offset mortgage 5.85%

Family Building Society Offset Mortgage Rates

Discounted offset mortgage rate from 6.19%

Halifax Offset Mortgage Rates

Halifax do not currently offer any offset mortgages.

Hinkley and Rugby Building Society Offset Mortgage Rates

No current rates

Melton Mowbray Building Society Offset Mortgage Rates

No current rates

Nationwide Building Society Offset Mortgage Rates

Nationwide do not currently offer any offset mortgages.

Scottish Widows Bank Offset Mortgage Rates

  • 2 year tracker offset mortgage 5.95%

Woolwich Fixed Offset Mortgage

Woolwich are now under the Barclays brand.

Using your savings for an offset mortgage rather than putting them in a savings account

Today inflation is running at 11% (RPI). Can you even best inflation with your savings in a deposit account?

Holding your money in an online savings account may pay you just 1.01% interest (for example Post Office)

As a higher-rate taxpayer, your net return is just 0.66% after tax.

Holding £50,000 in the Post Office therefore costs you £5,165 a year after the effect of inflation.

The same £50,000 offset against a typical offset mortgage balance saves you £1,750 in interest with no tax to pay.


  • No need to move your savings regularly to maintain a competitive
  • No need to worry about introductory offers
  • No need to worry about 90-day notice periods
  • No need to use up your ISA limit

How an offset mortgage works

standard mortgage
offset mortgage

With a standard mortgage you borrow money and pay interest on the full amount outstanding. When you pay funds into your mortgage, you cannot take them back again without making a formal application to the Lender.

With an offset mortgage you put your savings into your mortgage account.

Those savings are then offset daily against your mortgage balance before interest is applied.

You can withdraw your savings at any time with no limit. This allows you to massively reduce your mortgage interest when it suits and have access to cash when you need it. You pay off your mortgage in less time, whilst keeping control of your money.

Who should consider an offset mortgage?

Ideal offset mortgage clients include those with:

  • Fluctuating income
  • Seasonal income
  • Large bonuses
  • Commission work
  • Self-employment

Or those who simply want to use an offset mortgage to take years off their mortgage term and save thousands of pounds in interest.

Offset mortgage myths

  • Too expensive – no longer, offset mortgage rates in today’s market are highly competitive
  • Need a big cash pot to make it worthwhile – not true, every penny in your offset account makes a difference
  • Too complicated – offset accounts are simple to understand, and you can manage yours online
  • It is a self-employed product – employed clients find offsetting just as valuable as the self-employed

Interest only offset mortgages

Most mortgages on main residences are set up today on a capital repayment basis meaning that every month you pay interest on your mortgage and clear a little capital. In this way your account is set up to clear totally over a prescribed period (for example 25 years)

With an interest-only mortgage, your commitment is simply to cover your interest payments monthly repaying the capital through other means such as:

  • Other investments
  • Other property
  • Pension funds
  • Inheritance
  • Sale of property

Unlike the situation in the past, the Regulator has recently taken great interest in the basis on which Lenders offer interest-only mortgages. Rules on paying back capital through equity investments are now so tight as to be impractical.

Repaying your capital through the sale of your home and downsizing is an option that mainstream lenders consider perfectly viable in certain circumstances.

  • Make your savings work harder

Still not sure? watch our video.

View our video – offset mortgage

Flexible Mortgages

How does a flexible mortgage work?

A flexible mortgage is designed to allow the borrower greater flexibility in how they service the borrowing. It will typically feature the ability to overpay the mortgage, or no early redemption charges. The ultimate flexible mortgage is the offset mortgage.

What does a flexible mortgage mean?

A flexible mortgage means a mortgage that is designed to give the borrower some flexibility with regard to overpayment.

What are the features of a flexible mortgage?

Features of a flexible mortgage typically include the ability to overpay above 10% per annum or no early redemption charges. An Offset mortgage is the ultimate flexible mortgage and provides further flexibility.