Barclays' mortgage arm Woolwich celebrates the tenth birthday of offset mortgages this week, marking a decade since the first one was launched in the UK.
In honour of the occasion, Woolwich is cutting the cost of its offset mortgages by 0.40 per cent – from 3.49 to 3.09 per cent.
Woolwich offset mortgages have saved borrowers more than £1billion in mortgage interest since it launched on 1 June 2000, Barclays said, and has allowed customers to pay off their mortgages an average of three years ahead of schedule.
The average Woolwich offset mortgage customer borrows £132,000, typically using £21,000 of savings to offset the interest they pay on their outstanding mortgage balance.
Andy Gray, head of mortgages for Barclays, said he is not surprised that the "brilliantly simple" concept of offset mortgages has attracted the attention of consumers.
Explaining how offset mortgages work, he said: "People just manage their current account, savings and mortgage separately as they have always done and in the background all the components are added together every day, to save people interest and pay off their mortgage earlier."
When they were launched, offset mortgages introduced a "new approach" to the way people borrow money, Mr Gray continued, reducing their payment term – whereas before they saw a mortgage as a 25 year commitment – and saving "masses in interest".
Offset mortgages are also beneficial to tax payers, he said: "whether you are paying 20, 40 or 50 per cent tax the equivalent gross rate of return on savings ranges from 3.61 to 5.78 per cent."
Offset mortgages allow savers to keep their money where it is accessible, he added, while also using it to cut their mortgage interest.
© Fair Investment Company Ltd
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