Offset mortgages

An offset mortgage reduces the interest you pay by linking your savings account to your mortgage balance. The interest saving can be significant — but the rate on an offset product is usually higher, and the sums only work for some borrowers.

Last checked 13 September 2026. Editor: Kris · editorial standards

Five sections. Each anchored to a first-party source, checked 13 September 2026.

1. How offset works

You keep your savings in an account linked to the mortgage. Interest is calculated each day on the mortgage balance minus the savings balance. If you have a £200,000 mortgage and £40,000 in savings, you pay interest on £160,000. Your savings don't earn interest separately — instead, they reduce the interest you're charged. The full £200,000 monthly payment continues unless you choose to reduce it or extend the mortgage; the saving shows up as a shorter repayment period or lower payment, depending on how the product is structured.

2. The rate trade-off

Offset mortgage rates are typically 0.1–0.3 percentage points higher than equivalent non-offset products from the same lender. Whether offsetting your savings is worth it depends on the size of the rate premium, the amount you hold in savings relative to the mortgage, and what the savings would otherwise earn. Use the overpayment calculator to model what the same savings as a lump-sum overpayment would save in interest, then compare with the annual cost of the higher offset rate — if the offset rate premium costs more than the interest reduction saves, a standard mortgage with overpayments is likely better value.

3. Who benefits most

Offset mortgages work well for borrowers who regularly hold significant liquid savings and want the flexibility to access them. Higher-rate taxpayers benefit more than basic-rate taxpayers because the offset saving is effectively tax-free (it is an interest reduction, not interest received), whereas savings interest is taxable beyond the Personal Savings Allowance. The self-employed who hold several months of income in a current account as a cash buffer, and people who receive irregular lump sums (bonuses, freelance income), are natural candidates. They are less efficient for borrowers with small savings balances relative to the mortgage.

4. Flexibility

Most offset products allow you to draw down savings again if needed, which means the savings remain accessible. Some lenders allow you to offset multiple accounts — a current account, a savings account, and sometimes family members' savings linked with their consent. Confirm the exact terms with the lender before proceeding, particularly how quickly withdrawn savings stop offsetting (usually the same day, but check).

5. What to ask a broker

Ask the broker to model the total cost (rate times balance, minus offset saving) over the product period with your current savings balance, and compare it with the best non-offset equivalent. The rate and the savings balance both need to justify the choice. At the first meeting the broker must confirm the range of lenders it accesses and any fee it charges (MCOB 4.4A.1R and 4.4A.8R).

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General information, not advice. Mortgage Brokers List is a directory and a set of free tools. Only an FCA-authorised adviser can recommend a mortgage for your circumstances. See our editorial standards.