She says: “Your money could potentially work harder for you using an offset mortgage and this is because currently savings rates are very low."
Ms Newell says: “You can overpay with most standard mortgages but with an offset mortgage it is more flexible and you are generally able to withdraw any overpayments that you have made without any further questions.
“Most standard mortgages you would have to apply via further borrowing to get the money back out of the mortgage account.”
However Ms Newell adds the caveat that advisers should note arrangement fees can be higher with an offset mortgage.
Effective way to save
With savers suffering historically low interest rates, Lucy Quinton, marketing executive of Family Building Society, says many borrowers will be particularly conscious that the interest rate they pay for borrowing money will be higher than the rates they receive on their savings accounts.
By offsetting their savings against their mortgage, Ms Quinton says they would effectively be earning interest on those savings at the rate they are being charged for the mortgage.
These interest savings can therefore help to pay off their mortgage earlier.
Additionally as the savings are linked to the mortgage they do not generate interest themselves, which Ms Quinton says means there is no income tax to pay.
Ms Quinton says some offset mortgages are also a way to make effective use of the family’s savings.
With some types of offset mortgage, close family relatives are able to put any savings they wish to contribute in to an offset saver account, helping the borrower reduce their mortgage costs.
simoney.kyriakou@ft.com
