These are indicative figures only and may not represent all the costs associated with each product. For more information speak to one of our mortgage brokers on 023 8235 2300.
Offset Mortgage Rates
Compare the best offset mortgage rates here. You’ll also find all sorts of information on what an offset mortgage is, who an offset mortgage can be useful for, the things you need to consider before getting an offset and more.
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Are you moving home or looking to buy a new property? Making sure you’re getting the best mortgage deal at the same time as purchasing a new home can be daunting. You’ve got to save a deposit, meet the monthly payments, secure a good deal and find the right home. Luckily, there are options available that can help you save money and make the most of your situation, such as offset mortgages. An offset mortgage enables you as the borrower to offset your savings against your mortgage debt, allowing you to potentially reduce the interest payments.
Offset Mortgage Definition
So what does an offset mortgage mean? An offset mortgage is a home loan where your savings are offset against (counterbalance) your mortgage to reduce the amount of interest you’re charged. Essentially the mortgage lender subtracts your savings that are held in a linked account from your outstanding mortgage balance. Interest is then charged on the remaining, smaller figure, instead of the total outstanding mortgage balance.
For example, if you have a mortgage of £200,000 and savings of £50,000 in a linked account, you would only be charged interest on £150,000. This arrangement can lead to substantial interest savings over the life of the mortgage, shorten the loan term, or both.
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Compare Best Offset Mortgage Rates
Use our offset mortgage comparison tool to compare all kinds of mortgage deals and rates. Simply enter some basic information into the calculator and you’ll be shown a selection of relevant offset mortgage rates and deals on the market.
Offset Mortgage – How Does It Work?
So how do offset mortgages work exactly? An offset mortgage is a mortgage with a savings or current account that’s linked to the mortgage account. This savings account is sometimes referred to as “offset account”. The point of this savings account, and offset mortgages in general, is to enable you to use your savings to reduce the amount of interest you’re charged. The savings held in the account are subtracted from the outstanding mortgage balance and interest is then charged on the remaining figure.
When you decide to pursue an offset mortgage, your lender will help you set up a savings account that is attached to the arrangement.
You can benefit from the reduced interest charges in 2 main ways with an offset mortgage, you can either:
- Make lower monthly payments with a payment reduction offset
- Make the same monthly payments that you would on a normal mortgage, so that you essentially make overpayments on your mortgage and pay it off quicker, with a term reduction offset
Payment reduction offsets are available on both repayment and interest-only bases. Term reduction offsets are usually best applied to repayment mortgages.
It’s worth bearing in mind that fewer lenders offer offset mortgages which means they often come with slightly higher rates than comparable products. Eligibility criteria may also vary among lenders. Therefore, it’s important to carefully assess your financial situation to determine if an offset mortgage aligns with your goals and circumstances.
If you’re still on the fence, our offset mortgage repayment calculator can give you some more information on what your repayments could depending on your outstanding mortgage balance. You can also contact our financial experts, who will review your full situation and advise on the most appropriate course of action for your circumstances. Call us on 023 8235 2300.
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Types of Offset Mortgage UK
There are a variety of offset mortgage products on the market, so it’s a good idea to learn more about them when figuring out which is the best offset mortgage for you. We go through some of the different offset mortgage available below.
Repayment offset mortgages
Like with standard repayment mortgages, with a repayment offset mortgage you make regular capital and interest payments. Payment reduction offsets and term reduction offsets are both available as repayment products.
Interest-only offset mortgages
Like with standard interest-only mortgages, interest-only offset mortgages mean you only make regular interest payments and not capital payments. You pay back the total outstanding mortgage amount at the end of the mortgage term. Interest-only offset mortgages are typically only available with payment reduction, not term reduction. There also typically aren’t as many interest-only offset mortgage products available as lenders have strict requirements regarding repayment vehicles and some may not be confident that the savings held in the linked account would be a suitable.
Fixed rate offset mortgages
A fixed rate offset mortgage is an offset mortgage where the interest rate is fixed for a period of time, such as 2 or 5 years. After this you’ll be transferred onto your lender’s SVR (standard variable rate), unless you remortgage onto a new deal. Fixed offset mortgage rates are ideal if you’re looking to have consistent and predictable payments for an extended period.
Tracker rate offset mortgages
It is possible to get a tracker rate offset mortgage, but these are rarer than fixed rate ones. This is because a tracker rate moves in line with the Bank of England Base Rate and therefore can differ over the course of the mortgage, making calculating your monthly payments – which can already vary due to the setup of the offset – more complicated to calculate.
Buy-to-let offset mortgage
An offset mortgage for a buy-to-let property allows landlords to increase their overall cash flow as they’ll receive a higher net profit from letting. However, bear in mind when considering an offset mortgage for a buy-to-let property that they are quite rare and you won’t earn any interest on the savings linked to your offset mortgage.
Who Benefits the Most from Offset Mortgages?
Offset mortgages are particularly useful if you have significant amounts in savings – or are expecting to acquire some in the near future – and you require a mortgage. You can access your savings when needed, as well as having the freedom to vary monthly payments as long as you can meet the minimum required amount.
They’re also effective if you wish to pay more towards your mortgage balance on a regular basis but would like access to those funds at any time. Furthermore, offset mortgages are available for purchases or remortgages, and the interest savings from offsetting can potentially outweigh the returns from traditional savings accounts.
Here are some other benefits of an offset mortgage:
- Reduced interest payments – with a payment reduction offset, your savings can help reduce the amount of interest you’re charged. This can result in lower overall interest costs and monthly payments
- Faster loan repayment – with a term reduction offset, you make the same monthly payments on your mortgage, essentially making overpayments which can help you pay off your mortgage quicker
- Tax efficiency – as a general rule, you have to pay Income Tax on the interest earned on savings. The benefit of an offset mortgage is that by using your savings to offset, you won’t have to pay tax on the savings
What Are the Problems with Offset Mortgages?
While offset mortgages can offer flexibility and long-term savings, they aren’t suitable for everyone. As with any mortgage product, there are some potential drawbacks to be aware of before proceeding.
Risks of offset mortgages include:
- Higher interest rates – offset mortgages typically come with slightly higher interest rates than comparable standard mortgage products. If you don’t hold a meaningful level of savings, the extra interest charged may outweigh any benefit
- Reduced or no savings interest – you won’t earn interest on the money held in your linked offset account. While this can be tax-efficient, particularly for higher-rate taxpayers, it may be less beneficial if high-interest savings accounts are available elsewhere
- Savings discipline required – the effectiveness of an offset mortgage depends on maintaining healthy savings. If you regularly withdraw funds from the offset account, the interest-saving benefit reduces, and your mortgage costs can increase.
- Limited product availability – fewer lenders offer offset mortgages compared to standard mortgage products. This can mean less choice, stricter criteria, and fewer competitive deals
- Complexity – offset mortgages are more complex than traditional mortgages, particularly when choosing between payment reduction and term reduction. Understanding how changes to your savings affect your mortgage balance and payments is essential
- Opportunity cost – in some cases, you may be financially better off placing your savings in a higher-yielding account or investment, even after tax, rather than offsetting them against your mortgage
John Charcol Expert Tip - January 2026
“An offset mortgage can be a powerful tool if you have savings and want greater control over your finances. By linking your savings to your mortgage, you can reduce the interest you’re charged, lower your monthly payments or shorten your mortgage term without locking your money away. If used correctly, offsetting can save you thousands over the life of your mortgage. At John Charcol, we’ll help you decide whether an offset mortgage fits your wider financial goals and guide you to the most suitable deal.“
Nicholas Mendes
UK Mortgage and Property Expert
How Can John Charcol Help You Find an Offset Mortgage?
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Process for Buying a Home/Remortgaging
1. First conversation with adviser
When you phone us, you can either arrange a phone appointment with your adviser or a face-to-face meeting – whatever suits you. Your adviser will ask you some questions then go away and find you the best deal for your circumstances and future needs. They’ll organise a follow up during which they’ll present you with what they’ve found.
2. Decision in Principle
Once you’re happy with their recommendation, they’ll go about securing your DIP (Decision in Principle) – which is basically a promise from the lender that they’ll loan you money on the condition that the information you’ve provided is correct and subject to a valuation of the property.
3. Offer on property/remortgaging
After the lender has agreed your scenario, you’ll be in a position to make an offer on a property or move forward with the remortgaging.
4. Pre-Application and submission
Following the acceptance of your offer, we’ll send you some information which explains all the documents we need to submit to the lender. You’ll be assigned a client relationship manager who’ll check and submit certified copies of your documents; they’ll liaise with both you and the lender. Your adviser will then submit the fully packaged mortgage application.
5. Lender underwriting and valuation
The lender will underwrite your application; this basically means they’ll verify that the information you’ve provided is correct and review all your documents for themselves. They’ll also instruct a valuation for their purposes on the property to make sure there are no significant problems with it.
6. Mortgage offer
If the lender is happy with everything they’ve found, they’ll send you a mortgage offer. They’ll also send us a copy.
7. Conveyancing
After you’ve accepted your mortgage offer, you’ll go through the legal part of the process, known as conveyancing. This is where the solicitors/conveyancers draw up contracts and organise the actual, legal purchase of the property/remortgaging. If buying, you’ll also need to arrange buildings insurance at this stage, making sure it’s in place from exchange.
8. Exchange and completion
If you’re buying a property, your conveyancer/solicitor will exchange contracts with the seller’s conveyancer/solicitor; it’s at this point that you would put down your deposit and be legally bound to the property. The purchase will complete when the money is transferred on an agreed-upon date. If you’re remortgaging, then your conveyancer/solicitor will set a date to draw down the funds and pay off any existing lender(s) once the mortgage offer’s released.
How Do I Qualify for an Offset Mortgage?
Qualifying for an offset mortgage is similar to applying for a standard mortgage, but there are a few additional factors lenders will consider due to the way offset products work.
Key criteria typically include:
- Deposit and loan to value (LTV) – you’ll usually need a deposit of at least 10–15%, although this can vary by lender. Offset mortgages are often more competitive at lower LTVs, so a larger deposit can improve both eligibility and available rates
- Savings to offset – while there’s no strict minimum, offset mortgages work best if you have a meaningful level of savings to link to the mortgage. The more you’re able to offset, the greater the potential interest savings. Some lenders may require your savings to be held in a specific account type
- Income and affordability – lenders will assess your income, outgoings, and overall affordability in the same way as a standard mortgage. You’ll need to demonstrate that you can comfortably meet the required monthly repayments, even if your savings balance changes
- Credit history – a good credit profile will improve your chances of qualifying and accessing more competitive rates. Adverse credit may limit the number of offset lenders available to you
- Property type and usage – offset mortgages are available for purchases and remortgages, and in some cases buy-to-let, although lender criteria for non-standard properties or buy-to-let offsets can be stricter
Offset Mortgage Lender Criteria
Whilst every offset product achieves the same goal in principle, there are some subtle differences between lenders.
A few of the main differences include:
- The number of accounts that can be linked to your mortgage
- Some lenders will accept savings from a family member to be offset against the mortgage, subject to specific requirements
- The type and notice arrangements of these accounts
- The access you have to your savings should you need them
- The offset products they offer, whether it’s payment reduction, term reduction or both
Overpayment options
Term reduction offsets allow you to essentially make overpayments with no penalties, which is immensely advantageous, as overpayments typically contribute to the shortening of the loan term and saving you significant amounts in interest. However, the extent to which you can overpay varies between lenders and mortgage deals, so understanding these terms is essential.
Interest and overall financial benefit
While offsetting savings against mortgage debt can lead to interest savings on your mortgage and save you from paying Income Tax on the interest charged on your savings, this doesn’t necessarily mean you’ll be financially better off overall. This would depend on things like the Base Rate at the time.
This is because some savings accounts may earn you more interest (even with Income Tax charged) than what you save in interest with an offset mortgage.
Home insurance and protection
It’s also important to consider additional options with your home insurance and protection, including when applying for an offset mortgage.
Typically, buildings insurance safeguards your property’s structure against risks like fire, flooding, and damage caused by natural disasters. It is required for almost all types of lending, including offsets.
Protecting yourself as well as your property is equally important, especially with an offset mortgage. As, for example, rather than using your savings to help you through unforeseen events like losing a job or a health issue, mortgage protection would help you cover your mortgage payments and protect your home and savings.
Our in-house protection team can arrange critical illness cover and income protection, Life Insurance and more.
Offset Mortgage FAQs
Can I get a buy-to-let offset mortgage?
It is possible to get an offset mortgage or remortgage on a buy-to-let property, but they’re quite rare.
Are offsets only for higher rate taxpayers?
Although offset products come with strong benefits for higher rate taxpayers, all offset borrowers will benefit from the ability to reduce their mortgage terms or monthly payments.
Can I get an interest-only offset mortgage?
You can get an interest-only offset mortgage, but they only really work with payment reduction. It’s possible to take out interest-only offsets for residential purchases and remortgages, as well as buy-to-let purchases and remortgages.
Do offsets cost more?
Offset products tend to come with slightly higher rates than normal mortgages, although the fees are generally the same. Nonetheless, the benefits offered by the linked savings account can more than make up for any extra cost.
If you want to see what kind of rates are available for normal mortgage products – i.e. those without a linked savings account – you can compare the best fixed rate mortgage deals or trackers currently available.
Are offset mortgages still available in the UK?
Offset mortgages are still offered by a limited number of UK lenders, mainly larger banks and building societies. Because availability can change and criteria vary, the exact products on offer will depend on your circumstances.
Lenders that currently offer or are known for offering offset mortgages include:
- Barclays
- Coventry Building Society
- Yorkshire Building Society
Some lenders may also allow:
- Multiple savings accounts to be linked
- Family members’ savings to be offset, subject to conditions
Offset mortgages are less widely available than standard mortgage products, and not all lenders offer them for every purpose, such as buy-to-let or interest-only borrowing.
You can use our free offset mortgage comparison tool above to compare the best offset mortgage deals on the market today.
Can I offset 100% of my mortgage?
No, in practice you cannot fully offset 100% of your mortgage.
Most lenders place limits on how much of your mortgage can be offset using linked savings accounts, and interest will always be charged on at least a small portion of the outstanding balance. Offset mortgages are designed to reduce the amount of interest you pay, not to completely eliminate it.
Even if you hold savings close to the value of your mortgage, lenders will still require you to maintain the mortgage, make contractual payments, and pay some level of interest. If funds are withdrawn from the offset account, the amount of interest charged will increase accordingly.
For most borrowers, offset mortgages are best used as a way to partially offset the mortgage balance, reducing interest costs while retaining access to savings. An adviser can explain lender-specific limits and help you understand how much of your mortgage you can realistically offset.
Is it better to pverpay a mortgage or offset?
Whether it’s better to overpay your mortgage or use an offset mortgage depends on your financial goals.
Overpaying a mortgage can be effective if you’re confident you won’t need access to the money again, as it permanently reduces your mortgage balance and interest charged. Offsetting, on the other hand, offers more flexibility, allowing you to reduce interest while keeping your savings accessible if your circumstances change.
If you value flexibility and access to cash, offsetting may be more suitable. If your priority is long-term certainty and you’re happy to commit funds permanently, overpaying could be the better option. An adviser can help you decide which approach best suits your circumstances.
