"Despite the Personal Savings Allowance firmly in place the tax benefits an offset mortgage is still a consideration for many. The reductions in the average offset fixed rate and price are only going to boost its appeal."
Moneyfacts says that by combining the two products into an offset mortgage, borrowers will not only be able to reduce the size of their mortgage, but save thousands of pounds in mortgage interest.
Charlotte Nelson, Finance Expert at Moneyfacts, said: “With interest on savings accounts dwindling, it is a difficult time for many savers. However, those who have a mortgage could look elsewhere to see if their nest eggs can work even harder for them; an offset product could provide a genuine alternative. For example, based on the average two-year fixed rate for an offset (2.02%) and non-offset product (2.38%), a borrower would save £742 in just one year and shave a year off the term of their mortgage.
“With competition high in the mortgage market, providers are keen to stand out from their competitors by showing they offer a diverse range of mortgages at great prices, and offset products only enhance their offerings further.
“An offset mortgage is the ultimate flexible product, as it allows borrowers to reduce the interest paid on their mortgage while simultaneously having instant access to their savings pot. Despite the Personal Savings Allowance firmly in place the tax benefits an offset mortgage is still a consideration for many. The reductions in the average offset fixed rate and price are only going to boost its appeal.
“However, when mortgage rates have reached their low point, borrowers should keep in mind that there could be better deals out there. For instance, the lowest five-year fixed deal at 75% loan-to-value is priced at 2.05%, 0.23% less than the lowest five-year fixed rate offset deal. Borrowers looking to get the most out of their savings will therefore need to decide carefully whether the extra flexibility is worth paying for.”
