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Offset mortgages stake a claim for savers’ money

Offset mortgages stake a claim for savers’ money

Category: Mortgages

Updated: 16/10/2017
First Published: 10/05/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Cash ISA savers have been told their money might work harder for them, if they were to put it into an offset mortgage.

New research has shown that over the last ten years, typical cash ISA savers, who also hold a mortgage, would have been better off by placing their savings pot in an offset mortgage account.

Based on average cash ISA rates and average mortgage rates over the last ten years, first direct said that if savers had put their maximum cash ISA allowance into an offset account instead, they would have been better off by £3,306.

Saving the maximum amount into cash ISAs since 6 April 2000 would now be worth £38,328.

In contrast, someone placing the same amount into an offset mortgage would have saved £31,200, while knocking an additional £10,434 off their mortgage, making a total saving of £41,634.

"For people without a mortgage or possibly nearing the end of their mortgage, cash ISAs are often the most efficient way to save cash," said Richard Tolchard, senior mortgage product manager at first direct.

"However, for savers who hold a mortgage, this analysis shows that cash savings work harder offsetting against a mortgage than they do within a tax efficient ISA."

How can an offset mortgage make you money?

By offsetting your savings against your mortgage, you pay less interest on your mortgage and enjoy the flexibility of instant access to your money.

As mortgage rates over the longer term tend to be higher than savings rates, your money is working harder.

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