Offset / Current Account

With an offset mortgage the interest charge is calculated daily as opposed to yearly, which can make a significant difference to the cost for those on a repayment mortgage. They also provide flexibility and allow for periods of both under and overpayment  to suit the borrower's changing financial circumstances. There are two basic types of offset mortgage.

With Current Account Mortgages, the bank account and mortgage are combined as one, so customers view just one statement and have one balance. For example, if there is £4,000 in the current account and the mortgage is £100,000, the customer's balance will register £96,000 overdrawn. The balance is calculated daily and the homeowner pays interest only on the balance. Borrowers can also place any savings into the account in order to reduce the debt balance.

The second type of offset is where the deposits are kept in separate accounts or 'pots', but linked for the purposes of calculating interest. Lenders offering this type of product include Barclays and Woolwich, through Openplan, Intelligent Finance (IF), Egg, First Direct, Newcastle building society, Northern Rock and Yorkshire building society. Again borrowers pay interest only on the mortgage, minus savings.

The negatives

Interest rates on offset mortgages will rarely be the cheapest available and offsetting, therefore, is only worthwhile if you have a reasonable amount of money in your savings or current account.

Professional, unbiased advice

Finding the best mortgage to suit your personal circumstances can be time consuming and confusing, so it's make sense to get a broker to do the hard work for you. 

You can get a  free no obligation quote from an independent and impartial broker who will compare mortgage products from the whole UK market and will not be tied to any mortgage provider, ensuring that you receive unbiased advice.