Record low interest rates for offset mortgages

June 16, 2017 by Brendan O'Neill

Rates

Despite recent improvements, the interest rates on savings remain low, meaning that seeking an offset mortgage has become an attractive alternative option for people wanting to maximise financial value.

According to data from Moneyfacts, the average fixed rate offset mortgage is currently at 2.07%, the lowest on record and much lower than last year’s rate of 2.41%. The average fixed rate deal is 2.30%, which makes an offset mortgage an even more appealing option.

However, of the 4,000 mortgage deals which are currently available, there are just 232 offset mortgage deals on the market. Experts warn that individual deals vary, and advice should be taken before signing up to a mortgage. Mortgage advisors learn about different types of mortgage when they study on a CeMAP training course, so are best placed to offer advice.

With an offset mortgage, a borrower’s mortgage balance can be linked to their savings, which will result in the interest charged on the mortgage being reduced. Interest is only charged on the amount of mortgage which isn’t covered by savings. However, savings aren’t used to actually overpay the mortgage, so there is still the option of using savings if necessary. If a borrower decides to spend any of their savings, the amount of mortgage not covered by interest would increase, and the amount of interest charged would also increase.

An offset mortgage is suitable for anyone who has considerable savings and doesn’t mind losing the interest on them. As savings rates are generally lower than mortgage interest rates, borrowers could save themselves money.