Best Offset Mortgage Rates

Use our offset mortgage comparison tool to compare all kinds of mortgage deals and rates. Simply enter some basic information into the calculator and you'll be shown a selection of relevant offset mortgage deals on the market.

These are indicative figures only and may not represent all the costs associated with each product. For more information speak to one of our mortgage brokers on 0330 433 2927.

So what is an offset mortgage and how do offset mortgages work? An offset mortgage is a mortgage with a savings or current account that’s linked to the mortgage account. This savings account is sometimes referred to as "offset account". The point of this savings account, and offset mortgages in general, is to enable you to use your savings to reduce the amount of interest you’re charged. The savings held in the account are subtracted from the outstanding mortgage balance and interest is then charged on the remaining figure.

For example, if you have a mortgage of £200,000 and savings of £50,000 in a linked account, you would only be charged interest on £150,000. This arrangement can lead to substantial interest savings over the life of the mortgage, shorten the loan term, or both.

When you decide to pursue an offset mortgage, your lender will help you set up a savings account that is attached to the arrangement.

You can benefit from the reduced interest charges in 2 main ways, you can either:

• Make lower monthly payments with a payment reduction offset
• Make the same monthly payments that you would on a normal mortgage, so that you essentially make overpayments on your mortgage and pay it off quicker, with a term reduction offset

Payment reduction offsets are available on both repayment and interest-only bases. Term reduction offsets are usually best applied to repayment mortgages.

It's worth bearing in mind that fewer lenders offer offset mortgages which means they often come with slightly higher rates than comparable products. Eligibility criteria may also vary among lenders. Therefore, it’s important to carefully assess your financial situation to determine if an offset mortgage aligns with your goals and circumstances.

If you’re still on the fence, our offset mortgage repayment calculator can give you some more information on what your repayments could depending on your outstanding mortgage balance. You can also contact our financial experts, who will review your full situation and advise on the most appropriate course of action for your circumstances. Call us on 0330 433 2927.

There are a variety of offset mortgage products on the market, so it’s a good idea to learn more about them when figuring out which is the best offset mortgage for you. We go through some of the different offset mortgage available below.

Repayment Offset Mortgages

Like with standard repayment mortgages, with a repayment offset mortgage you make regular capital and interest payments. Payment reduction offsets and term reduction offsets are both available as repayment products.

Interest-Only Offset Mortgages

Like with standard interest-only mortgages, interest-only offset mortgages mean you only make regular interest payments and not capital payments. You pay back the total outstanding mortgage amount at the end of the mortgage term. Interest-only offset mortgages are typically only available with payment reduction, not term reduction. There also typically aren’t as many interest-only offset mortgage products available as lenders have strict requirements regarding repayment vehicles and some may not be confident that the savings held in the linked account would be a suitable.

Fixed Rate Offset Mortgages

A fixed rate offset mortgage is an offset mortgage where the interest rate is fixed for a period of time, such as 2 or 5 years. After this you’ll be transferred onto your lender’s SVR (standard variable rate), unless you remortgage onto a new deal. Fixed offset mortgage rates are ideal if you’re looking to have consistent and predictable payments for an extended period.

Tracker Rate Offset Mortgages

It is possible to get a tracker rate offset mortgage, but these are rarer than fixed rate ones. This is because a tracker rate moves in line with the Bank of England Base Rate and therefore can differ over the course of the mortgage, making calculating your monthly payments - which can already vary due to the setup of the offset - more complicated to calculate.

Buy-to-Let Offset Mortgage

An offset mortgage for a buy-to-let property allows landlords to increase their overall cash flow as they’ll receive a higher net profit from letting. However, bear in mind when considering an offset mortgage for a buy-to-let property that they are quite rare and you won’t earn any interest on the savings linked to your offset mortgage.

Differences Between Lender Criteria

Whilst every offset product achieves the same goal in principle, there are some subtle differences between lenders.

A few of the main differences include:

• The number of accounts that can be linked to your mortgage
• Some lenders will accept savings from a family member to be offset against the mortgage, subject to specific requirements
• The type and notice arrangements of these accounts
• The access you have to your savings should you need them
• The offset products they offer, whether it’s payment reduction, term reduction or both

Overpayment Options

Term reduction offsets allow you to essentially make overpayments with no penalties, which is immensely advantageous, as overpayments typically contribute to the shortening of the loan term and saving you significant amounts in interest. However, the extent to which you can overpay varies between lenders and mortgage deals, so understanding these terms is essential.

Interest and Overall Financial Benefit

While offsetting savings against mortgage debt can lead to interest savings on your mortgage and save you from paying Income Tax on the interest charged on your savings, this doesn’t necessarily mean you’ll be financially better off overall. This would depend on things like the Base Rate at the time.

This is because some savings accounts may earn you more interest (even with Income Tax charged) than what you save in interest with an offset mortgage.

Home Insurance and Protection

It’s also important to consider additional options with your home insurance and protection, including when applying for an offset mortgage.

Typically, buildings insurance safeguards your property's structure against risks like fire, flooding, and damage caused by natural disasters. It is required for almost all types of lending, including offsets.

Protecting yourself as well as your property is equally important, especially with an offset mortgage. As, for example, rather than using your savings to help you through unforeseen events like losing a job or a health issue, mortgage protection would help you cover your mortgage payments and protect your home and savings.

Our in-house protection team can arrange Critical Illness Cover, Income Protection, Life Insurance and more.