Offset mortgages ideal for savers with money in bank

10 July 2007
Offset mortgages could be the best deal for homeowners looking to dampen the impact of potential further base rate rises on their personal finances, advice site has suggested.

Although customers are often put off offset products for fear they will prove too complex to understand, the basic principle is simple - using a customer's savings to scale down their mortgage repayments.

The overall debt owed to the mortgage lender is reduced by the amount the homeowner has saved in the bank, usually by cutting the rate the customer pays over the duration of the mortgage term.

Splicing your mortgage with any savings you have could be "a much more effective way to manage borrowing", said Louise Cuming, head of mortgages at

Offset mortgages make most sense, according to Ms Cuming, for savers with more than £12,500 in the bank.

But "unfortunately the majority of customers tend to go back to what they understand – cheap short term deals", she remarked.

Nevertheless, offsets are becoming increasingly popular, with year-on-year growth of 49 per cent in the value of new borrowing on these mortgages between April 2006 and March 2007 according to the Council of Mortgage Lenders.

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