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Offset mortgages

Compare offset mortgages

We've partnered with Mojo Mortgages to help you compare offset mortgages with an expert

  • Advisers who can look at mortgage rates from across the market

  • Get an expert-recommended deal

  • They can help you apply when you're ready

What is an offset mortgage?

Offset mortgages involve linking your mortgage to your savings account, reducing your overall interest payments. Your savings account and mortgage normally needs to be with the same bank/building society.

The total balance saved in your linked savings account is taken from what you owe on your mortgage. The amount left in your mortgage is then used to calculate a lower mortgage interest for you to pay.

If you link your mortgage, you'll no longer earn interest on your savings account. But you might save more in interest with an offset mortgage than you’d earn on a savings account.

How does an offset mortgage work?

Offset mortgages work by using your savings to reduce the loan amount you pay interest on.

To be clear, you don't use your savings to pay off some of your mortgage, but they help to lower the amount you pay interest on.

For example, you have a mortgage of £200,000 and a savings account with £20,000. With an offset mortgage, you'd only pay interest based on £180,000 of the mortgage. This means you could save up to 10% on the interest amount.

How to compare offset mortgages

We've partnered with Mojo Mortgages whose expert brokers can look at offset mortgages from across the market to find the right deal for you.

How much can I save if I offset my mortgage?

The more savings you can offset against your mortgage, the more you’ll save on interest payments.

Let’s use our £200,000 mortgage example again:

If you save £6,000 in your offset savings account with a 3% interest rate over a 25-year mortgage term, you could save £4,440 over the term.

But if you save £20,000 at the same rate over the same term, you could save £14,540 in interest over the term. This works out at £580 per year.

Pros and cons of offset mortgages


  • May be higher interest savings than interest saved from a savings account.
  • You still have access to your savings.
  • You'll pay no tax on the interest you save.
  • You can help first-time buyers with an offset mortgage by offsetting your savings against their mortgage.


  • There can be higher interest rates with an offset mortgage.
  • You won’t earn interest on your savings if you use them to offset your mortgage.
  • If you draw from the savings you’re using to offset your mortgage, your monthly mortgage interest payments will increase.
  • You may need to save for a bigger deposit for an offset mortgage. Some lenders ask for 25% of the property value.
  • There’s not a huge variety of offset mortgages on the market.
  • Some lenders ask for a minimum amount of savings to open an offset mortgage.

Can I still access my savings with an offset mortgage?

Yes, you can access and withdraw from your offset savings account whenever you like.

But remember that if you choose to withdraw money, you're reducing the amount you can offset against your mortgage. This means your monthly mortgage payments may increase.

Some lenders can also insist that you keep a minimum amount of savings for your offset mortgage.

If you want to spend your savings, you could think about changing mortgages and finding out what type of mortgage is best for you.

Offset mortgage rates

Sometimes offset mortgages can have higher interest rates, which might counteract any savings you might make by offsetting.

You’ll save more interest if you have a high amount of savings that you can afford not to touch.

As with standard mortgages, the interest rate can be fixed or variable.

Fixed means your interest rate won’t change for a set period of time.

Variable means that the interest rate can go up or down according to the lender's standard variable rate (SVR) or the Bank of England Base rate.

The actual mortgage rate you'll be offered depends on the following factors:

  • How much you earn
  • The size of your deposit
  • How much you want to borrow

What's the difference between offsetting and overpaying?

Overpaying your mortgage means that you pay higher monthly repayments than needed. This will help you pay off your mortgage sooner, but lenders normally have a limit on how much you can overpay without facing penalties or fees.

Offsetting means your mortgage is linked to your savings account. The amount in your savings account is taken from your mortgage, meaning you pay a lower interest based on the offset amount.

What our expert says

Offsetting your savings against your mortgage can be a useful way to reduce your interest payments. But make sure you wouldn't benefit more by putting your money in a separate savings account with a decent interest rate.

Offset mortgage FAQs

Is an offset mortgage a good idea?

Whether an offset mortgage is a good idea depends on your personal circumstances.

You generally need a large amount of savings that you can afford to leave untouched. The higher the savings, the more you'll save on interest payments. If you withdraw money from your savings, your interest amount will rise.

Can I pay my mortgage quicker with an offset mortgage?

If you choose to overpay your mortgage (either by increasing your monthly payments or with a lump sum), you may be able to pay it off quicker.

But you should check with your lender before you do this, as there is normally a limit to how much you can overpay before you face early repayment charges (ERCs).

What happens if I overpay on my offset mortgage?

If you choose to overpay on your mortgage, you could benefit from a shorter mortgage term and paying less interest overall. But there are normally limits to how much you can overpay before you face additional charges and you also won't be able to get that money back.

If you would prefer to have your money accessible, you could instead pay more into your savings account to reduce your monthly interest charges. The right decision for you will depend on your individual circumstances.

Is it better to put down a bigger deposit instead of offsetting?

It depends on your personal circumstances. If you have a bigger deposit, you might benefit from lower interest rates on your mortgage. But once you’ve put down the deposit you won’t be able to get it back.

With an offset mortgage you have savings for the future when you’ve paid off your mortgage. But if you withdraw from your savings before then, your monthly payments could increase.

You can speak to our broker partner, Mojo Mortgages, who can help compare the best offset mortgages for you against standard mortgages with the deposit you have.

Can I use an offset mortgage for buy-to-let?

If you're looking for buy-to-let mortgages, there are some lenders who offer offset deals. But the options may be limited and there could be a strict eligibility criteria.

How do offset mortgage work with tax?

Most people pay tax on their savings unless it's an ISA account. For savers with an offset mortgage, the money is tax-free. When you have an offset mortgage, you won't earn any interest on your savings but you'll pay less interest on your mortgage.

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Page last reviewed: 11 September 2023

Reviewed by: Claire Flynn


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