Offset mortgages are one of the fastest growing areas of the UK mortgage industry. The Council of Mortgage lenders have said they now account for 7% of the total market. In 2006 the value of offset mortgages has increased by 49%, compared to 15% for standard mortgages. As a consequence of the increased consumer demand for offset mortgages the number of lending institutions offering offset mortgages has increased fourfold.
The main advantages of offset mortgages are:
- Reduce mortgage debt and therefore mortgage payments, by using current account savings to automatically ‘offset’ - reduce your mortgage debt
- The interest rate on a current account is nearly always lower than the interest rate on a mortgages
- Save paying income tax on interest from bank accounts. For top end tax earners this can be worth 40%
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2 comments ↓
I agree that offset mortgage can be of great benefit to those paying 40% income tax on their savings accounts. While offset mortgages are becoming more popular I would guess this is only amongst those on high earnings. In my experience offset products are not suitable to those on an average household income as they cannot normally offset a high enough ammount to make any significant impact. These people wouldbe better off making use of any flexible features on their mortgage and making overpayments when they can. What is your opinion on this?
Hi Daniel,
Yes, I agree. Personally I would not consider an offset mortgage because:
a) I don’t have anything in my current account
b) I don’t pay the higher rate of income tax.
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