The popularity of offset mortgages is increasing every year, according to the Council of Mortgage Lenders (CML), whose new research shows that they represented seven per cent of all new lending in 2006.
Offset mortgages combine a mortgage and savings in one account and were first introduced to the market in 1997.
The number of lenders offering Offset mortgages has grown more than five-fold over the past decade, and year on year growth between April 2006 and March this year was 49% (by value) compared to just 15% for traditional mortgages.
CML’s research shows that 170,000 offset mortgages taken out in the UK in 2006 at a value of £29.3billion.
Offset mortgages offer more flexibility than standard mortgages because savings in the borrowers account help reduce or ‘offset’ the costs of a mortgage. With an offset mortgages, the interest is lower and the mortgage term is shorter, borrowers can make over or under payments, and, any savings the borrower has will earn a rate of interest similar to the mortgage rate, but are not subject to income tax.
Author of the research and CML statistician Phoebe Zhang said: "Today's research reflects the dynamic nature of the UK mortgage market. Mortgage lenders are constantly developing new products to meet the needs of borrowers and the fact there are now 250 offset products available in the market illustrates this.
"Going forward, continued innovation by lenders will help to increase consumer awareness of offset products and expand the market potential for offsets in the future."
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