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Can offset mortgages save you money? By Rachel Williams
Offset mortgages offer a tempting proposition. By combining your mortgage with your savings, and even your current account, it's possible to save thousands and knock years off your mortgage without losing access to your money.
Don't lose access
According to Intelligent Finance (IF), a borrower with a £100,000 IF Offset tracker and £10,000 in savings with IF would knock nearly three years off their mortgage and save almost £24,500 in interest. They'd save even more if they linked in a current account and made overpayments. This makes offsetting ideal for those who have a lump sum they would like to pay into their mortgage, but at the same time don't want to lose access. They're also great for higher-rate taxpayers who see 40% of their interest lost to tax when they hold money in traditional savings accounts. The 10% rule
However, offset mortgages are not suitable for everyone. While offset rates are coming down, they will never be as cheap as the best traditional deals. Unless you have a lot in savings that you're unlikely to spend in the foreseeable future, you would still be better off getting your mortgage on the lowest rate and keeping your savings in a high-interest account. Then, you can make overpayments as and when your mortgage and finances allow. As a starting point, London & Country Mortgages recommend you have at least 10% of your mortgage in savings for offsetting to make sense.
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