Updated: June 07, 2022

Offset Mortgages Explained

Looking to use your savings to reduce your mortgage costs? Find out how in our expert guide.

Get Started
Ask A Quick Question

Ask A Quick Question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

FCA Logo
1 of 3
2 of 3
3 of 3 Send!

No impact on your credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: June 07, 2022

Are you looking for a way to reduce your mortgage costs by using your savings, without overpaying? If so, an offset mortgage could be for you. This guide will outline everything you need to know about this unique kind of home loan, how it could reduce your payments, and where to find the perfect deal.

What is an offset mortgage?

An offset mortgage links your savings account to your mortgage to reduce the amount of interest you pay. You won’t earn interest on your savings, but instead, will only pay interest on the mortgage balance less your savings amount. The goal is to save more interest by offsetting than you’d be able to earn in a savings account.

How much you have in your savings account can make a huge difference. Offset mortgages are generally recommended for those who have significant savings that, once offset, can dramatically reduce the amount of interest they’ll pay on their mortgage.

However, if you don’t have a substantial savings pot the benefits won’t be as noticeable, and nor will it be advisable if you can’t leave the money untouched. In either case, you may be better off seeking a standard low-rate mortgage deal instead.

Speak to a expert today

Get Started

How do they work?

Let’s say you’ve got a £150,000 mortgage and £40,000 in a linked savings account. Your savings are “offset” against the mortgage, which means you’ll only pay interest on £110,000 of your mortgage balance.

On a typical 25-year mortgage term at a rate of 3%, you’d pay £3,226 in interest over the first year, compared with £4,442 if you had a standard mortgage. This equates to a saving of £1,216. Even accounting for savings interest doesn’t flip the balance – you’d earn £601 in interest on a £40,000 savings pot at a typical rate of 1.5%, bringing the net gain by offsetting to £615.

What are the key benefits?

You’ll save more in mortgage interest than you’d earn in a savings account, and you can choose how you want to take advantage of that – be it reducing your mortgage payments, or reducing the term and paying off your mortgage quicker.

Using the same example as above, if you kept your monthly repayments at £711, you could pay off your mortgage after 21 years if you offset, rather than the 25 years if you didn’t. This could equate to total interest savings of over £16,000, even after accounting for the £18,000 you’d otherwise earn in savings interest, and you’d still have your £40,000 savings pot left at the end of it.

Alternatively, you could arrange with your lender to reduce the amount you pay each month, which would mean you’d still need to repay the mortgage over 25 years but could benefit from improved cash flow in the interim.

It can be difficult to know which option to take, but a broker who’s experienced in offset mortgages will be able to help you decide which course of action is best for you.

Can you access your savings during the term?

Yes. Most lenders will allow access to your savings during the term of the mortgage, offering valuable flexibility and making it an ideal choice for those who aren’t sure if they can commit to locking their savings away for any length of time.

However, bear in mind that should you withdraw your savings, they’ll no longer be offsetting your mortgage – which means your interest payments can rise accordingly.

What kind of account can you use?

Typically speaking, any kind of bank account you use to hold money can be linked to your mortgage, including:

  • Standard savings accounts
  • ISAs
  • Current accounts

Some lenders allow business accounts to be linked as well as personal accounts, though there may be additional criteria involved. You may also be expected to open an account with your mortgage lender, rather than linking an account from a separate provider.

Types of offset mortgage

Much like with standard mortgages, there are several types of offset mortgage to choose from, including:

  • Fixed rate offset mortgage. The interest rate you pay on your mortgage balance after your savings have been offset is fixed for a set term, typically two, three or five years. Your repayments will be fixed for the set number of years (provided you don’t change your savings balance).
  • Lifetime offset tracker mortgage. The interest rate is variable and will usually follow the Bank of England base rate. Bear in mind this can mean your repayments will change, which can make it harder to budget.
  • Interest-only offset mortgage. Rather than a repayment mortgage, which will see both the capital and interest repaid by the end of the full term, an interest-only deal will only clear the interest (the amount of which is still governed by your linked savings). This means you’ll still need to repay the full mortgage balance at the end of the term.
  • Family offset mortgage. This allows a family member to link their savings account to your mortgage balance and help you pay less interest. These mortgages work in exactly the same way as if it were your own savings account being used, though make sure that your loved one knows the practicalities of it – namely, that they won’t earn any interest on their savings while their account is linked.

Our Broker-Matching Service Guaranteed!

We want you to have complete confidence in our service, and get the best chance of securing your mortgage. We guarantee to get your mortgage approved where others can’t – or we’ll give you £100*

Get Started
Learn More
Mortgage Approval Guarantee or £100 back

How to get an offset mortgage

If you’re interested in getting an offset mortgage, there’s a few simple steps you can take which should make the process much more straightforward.

Step 1: Speak to a mortgage broker

A broker can help you decide if this is the right kind of product for your circumstances – taking into account your level of savings, access needs and the potential benefits of offsetting – and if so, will help you source the ideal lender to help.

Step 2: Decide how much of your savings you can devote to offsetting

This is a crucial part of your offset mortgage journey, as you’ll need to decide how much of your savings you can realistically commit in order to maximise the benefits. It isn’t always an easy calculation, but a broker will be able to talk things through with you so you feel confident in your decision.

Step 3: Get your paperwork together

Not only will you need to collate the usual documents required for a mortgage – such as your ID, proof of address and income verification – but you’ll also need to get your savings paperwork to hand. Make sure you’re not tied into any fixed rate deals and get ready to move your money, as most lenders will require you to open a linked savings account with them.

Once you’re ready to apply, your broker will be able to step in once again. They’ll know the lenders you should approach based on your unique requirements and can help you source the very best offset mortgage. They’ll take charge of the application process to keep things as streamlined as possible.

Want to see what a broker can do for you? Get in touch and find out.

Eligibility criteria

Eligibility criteria will be broadly similar for this type of home loan as for other kinds of mortgage, with particular focus being given to your age, employment status and credit score.

However, there may be additional criteria to bear in mind for this kind of deal, including different deposit and savings requirements.


You may be expected to put down a higher deposit for offset mortgages than for standard deals. For example, while 90% and even 95% loan-to-value (LTV) deals are becoming more readily available for traditional mortgages, offset lenders may only go as high as 80% LTV, asking for a deposit of at least 20%.


Some lenders will expect you to have a minimum savings balance before they’ll offer you an offset mortgage, and you’ll need to bear this in mind if you’re looking to withdraw your funds at any point.

For example, Hinckley & Rugby Building Society has set a minimum balance of £250, and Family Building Society has a £100 minimum. However, this can vary and some lenders don’t ask for this kind of commitment. Remember too that you’ll likely get the most benefit if you’ve got a significant savings pot, so you’ll probably want to exceed the minimum.

Which lenders offer offset mortgages?

Not many lenders offer offset mortgages, and so your choice of products is limited. Most mainstream lenders don’t operate in this space – bar a few exceptions, including NatWest and Barclays – which means you may have more success heading to smaller lenders and building societies.

However, speaking to a broker who already knows the market will give you a far broader picture of your options, and can help ensure you find the best offset mortgage for your needs.

Things to consider

An offset mortgage can certainly have its benefits, but it’s important to understand the full picture before you decide. Here are some other factors to consider for offset mortgages – both pros and cons – to help narrow things down.


  • You can still access your savings should you need.
  • You’ll normally still be able to make overpayments on your mortgage.
  • They can be particularly tax-efficient for higher or additional rate taxpayers who would otherwise have to pay additional tax on their savings interest.


  • You won’t earn any interest on your savings.
  • Interest rates can be higher for offset mortgages than for standard deals, which can negate some of the benefits.
  • If you need to withdraw your savings, you’ll pay more interest on your mortgage balance.
  • Not many lenders offer these mortgages.
  • Some offset mortgages have minimum savings balance requirements.

Get matched with a broker who specialises in offset mortgages

Having the right broker on your side can make all the difference when it comes to securing your ideal mortgage, and we can put you in touch with the expert who can help.

We work with lots of advisors who specialise in offset mortgages, and we can pair you with them for a free no obligation chat – just tell us a few details and our unique broker matching service will do the rest. Call us on 0808 189 0463 or make an enquiry to get started.


What is a mortgage current account?

Current account mortgages are a little different to offset mortgages, in that rather than linking your mortgage to an individual savings account, your debts and savings are combined in a single account. This can include credit cards and loans, with your savings balance being used to reduce the interest on your overall debt.

Would I be better off overpaying or offsetting?

This depends on several factors, including the amount you’ve got in savings, your mortgage balance and respective interest rates. Bear in mind that overpaying using your offset savings will mean you lose access to it, so while you can still benefit from reduced interest payments, you won’t be able to withdraw the money should you need. It can be a difficult calculation, which is why it’s best speaking to an expert broker who will be able to advise.

Should I use my savings for my deposit or for an offset mortgage?

Again, there’s a lot to consider with this answer. The general rule of thumb is to put down as big a deposit as you can afford, as this will lead to a lower LTV and therefore a lower mortgage rate, which will reduce your interest costs in itself. However, some borrowers may want more flexibility and would prefer to leave some of their savings more accessible, in which case an offset mortgage could be worth considering.

Can I get an offset mortgage on a buy-to-let?

Yes, though your choices are even more limited than for residential offset mortgages. At the time of writing, only three lenders are able to offer buy-to-let offset mortgages – Clydesdale Bank, Hinckley and Rugby Building Society and Family Building Society.

Ask A Quick Question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

FCA Logo
1 of 3
2 of 3
3 of 3 Send!
Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Get Started