Rates on offset mortgages have plunged to an all-time low and could offer an alternative to savers frustrated by the low rates of return currently on offer on savings accounts.
According to the latest data from Moneyfacts.co.uk, the average offset fixed rate is now priced at 2.65%, over one percentage point lower than two years ago when the rate stood at 3.68%.
An offset mortgage allows you to use your savings to reduce the amount of interest you pay on your mortgage. The effect is that you can either finish your mortgage earlier by having a shorter term, or make lower monthly repayments.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said that for consumers frustrated by the poor savings returns currently on offer, offset mortgages can offer a "genuine alternative".
"It makes sense for those with a mortgage to utilise their cash savings within an offset facility to pay off substantial sums on their mortgage and drive down the mortgage balance quickly," she added. "But, unlike overpayments, borrowers can access the cash whenever it is needed."
With competition in the mortgage market probably as fierce as it has ever been, Ms Nelson said that mortgage providers are keen to show that they offer a diverse range of mortgages "at great prices".
"One of the biggest criticisms of offset mortgages is that the rates tend to be higher than standard mortgages on the market," said Ms Nelson. "However, with rates reaching all-time lows, there has never been a better time for savvy borrowers to grab themselves an offset deal."
Find out more information in our offset mortgage guide
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