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IMPORTANT: The last day of the 2024 / 2025 tax year is Saturday 5 April.
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How an Offset mortgage works
An Offset mortgage allows you to reduce your monthly mortgage payments or reduce the term of your mortgage, saving you money in interest payments. Learn more about an Offset mortgage.
How offsetting works
An Offset mortgage works in a similar way to a standard mortgage. However, it has an additional feature known as an Offset Saver savings account. This savings account is linked to the mortgage. The amount of money in the Offset Saver savings account is deducted from the mortgage on which interest is charged.
You can choose to offset your savings to either reduce the balance of your mortgage (Repayment mortgages only) or reduce your monthly payments.
You have the option to overpay your mortgage regularly each month or make occasional additional payments. You can then use this extra money to reduce the amount of your future payments.
You won’t earn interest on the Offset Saver account while it's linked to the mortgage.
Frequently asked questions
View our full list of FAQs for more information here.
Watch our short video that explains how the Offset Mortgage works:
Offset mortgage options
Option 1 - Balance reduction (only available for repayment mortgages)
With this option, your offset savings help you to pay your mortgage off sooner. Offsetting does not affect your monthly mortgage payments. However, it does assist in saving on interest and paying off a larger portion of your mortgage each month. Your mortgage balance should reduce faster, and you may be able to pay your mortgage off early.
In this example, the mortgage will be repaid nine years and 4 months earlier, saving you 113 payments of £1,250 In total that is £140,472 less to repay. Plus, unlike a regular savings account, you pay no tax on the money held in an offset account. The future tax treatment of offset savings accounts may vary.
Mortgage amount | £200,000 |
Offset Saver account | £40,000 |
Mortgage rate | 6.39% |
Term | 30 years |
Payment | £1,250.00 |
Repaid early after 20 years and 8 months! |
Option 2 - Payment reduction
This option allows you to benefit from lower monthly mortgage payments, but you won’t pay off your mortgage any faster. Interest saved each month will be used to reduce the amount of your next month’s mortgage payment. The more savings you offset, the lower your monthly payment will be.
Using your savings to lower monthly payments won't decrease your mortgage balance or remaining mortgage term faster than if you were on a traditional mortgage.
Payment reduction summary
With an Offset Saver account | Without an Offset Saver account | |
Mortgage amount | £200,000 | £200,000 |
Offset Saver amount | £40,000 (20%) | £0 |
Mortgage rate | 6.39% | 6.39% |
Term | 30 years (Max 40 years) | 30 years (Max 40 years) |
Payment | £1,037.00 | £1,250.00 |
Monthly saving | £213.00 | |
Repaid after | 30 years | 30 years |
The above diagrams use interest rates which are for illustrative purposes only.
Representative example
A mortgage of £177,000.00 payable over 9 years initially on a discounted variable rate for 2 years at 2.15% below our variable Managed Flexi Mortgage Rate and then on our variable Managed Flexi Mortgage Rate, currently 8.54% would require 23 monthly payments of £2,159.32 and 85 monthly payments of £2,311.28 plus one initial interest payment of £932.09.
The total amount payable would be £248,329.25 made up of the loan amount plus interest of £70,055.25, an Application Fee of £175, a Product Fee of £999 and a Mortgage Exit Fee of £100.
Offset mortgage brochure
Find out more about our Offset mortgage and how it can work for you.