Offset mortgage products which link mortgage and savings products are soaring in popularity, the Council of Mortgage Lenders (CML) has found.
Around seven per cent of all new lending in 2006 was on offset mortgages, with 170,000 of these products taken out altogether.
Meanwhile, the value of offset mortgages taken out between April 2006 and March 2007 soared by 49 per cent while the value of non-offset mortgage borrowing grew by just 15 per cent over the same period.
Advantages of offset mortgage products include the option of making an over-payment or under-payment, keeping repayment obligations flexible, as well as lower interest payments and a shorter mortgage term overall.
Savings the borrower already has will earn an interest rate similar to that offered on the mortgage, but will also be protected from income tax.
Yorkshire Bank, meanwhile, has highlighted the possible advantages of this mortgage type for the three in ten homeowners in the UK who hold their savings, current account and mortgage with the same bank or building society.
This group of around four million people could be saving themselves over £11,000 in interest each if they combined the products into an offset mortgage, the bank believes.
Find out more about offset mortgages
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