With an offset mortgage you reduce your monthly interest bill by setting your savings or, if you choose, your savings and current account balances against your mortgage debt.
(To read more about how this works, go to The offset mortgage.)
To decide if offsetting is for you, ask yourself
• Am I comfortable with the idea?
• Do I have enough money to make it worthwhile?
For some people offsetting is a difficult concept to grasp particularly the current account mortgage option and you shouldn’t choose it if it makes you uneasy. Offset mortgages tend to charge a higher interest rate than ordinary discounted variable and fixed-rate loans.
So it isn’t worth choosing this option unless you have enough cash to really make a difference.
you’ll get the most benefit if you have a substantial amount of savings you can transfer into the offset account.
Using the cash in your current account will help too, but unless you’re highly paid this isn’t likely to average more than a couple of thousand pounds a month, so it won’t make a huge difference.
Offsetting can be Good for
• Committed savers
• Higher-rate taxpayers
• The self-employed
Offsetting tends to suit committed savers who don’t want to lose access to their cash permanently by using it to pay off chunks of their mortgage.
It’s also good for higher-rate taxpayers, who have least to lose by foregoing savings interest.
And it can work well for the self-employed, who get paid gross and need somewhere to stash their tax money for months at a time.
For more on this, read, How much could I save by offsetting?