If you’re exploring different mortgage options and want something flexible that could save you interest in the long run, an offset mortgage might be worth considering.

Offset mortgages have been around for a while, and although they’re less common today than they were in the 1990s, they can be a great option for certain types of borrowers, especially those with savings or expecting a lump sum in the near future.

What is an offset mortgage?

An offset mortgage links your mortgage to a dedicated savings account provided by your lender. Instead of earning interest on your savings, that balance is used to reduce the amount of mortgage interest you pay.

For example, if you have a mortgage of £150,000 and £25,000 in your linked savings account, you’ll only be charged interest on £125,000. Your monthly payments may stay the same, but more of that payment goes towards reducing the capital, meaning you could pay off your mortgage quicker or reduce the total interest over time.

How do offset mortgages work?

One of the biggest benefits of an offset mortgage is flexibility. You can usually add or withdraw funds from your savings account at any time, which is ideal if you want your money to work harder but still be accessible in an emergency.

Offset mortgages can be particularly useful if:

  • You’re expecting a lump sum, such as a work bonus, gift or inheritance
  • You regularly save but want to reduce your mortgage interest instead of earning taxable interest
  • You’re a higher-rate taxpayer looking for a tax-efficient way to use your savings
  • You want the option to reduce your mortgage term without committing to fixed overpayments

Unlike standard overpayments, the money in an offset savings account can still be withdrawn. So if you need quick access, it’s available, without needing to remortgage or release equity.

What should I consider before choosing an offset mortgage?

Offset mortgages aren’t for everyone. To make them worthwhile, you’ll need to keep a meaningful amount in your savings account. If your balance is low, the interest savings may be minimal compared to other mortgage options.

It’s also worth noting that offset mortgages may have slightly higher interest rates than standard products. If you’re unlikely to use the offset feature consistently, a regular fixed-rate mortgage might be more cost-effective.

A mortgage advisor in Manchester can help you calculate whether the interest saved through offsetting will outweigh the potential extra cost of the mortgage itself.

Are offset mortgages good for first time buyers?

If you’re a first time buyer in Manchester with a strong saving habit, an offset mortgage could offer more flexibility than a standard deal. They can also work well if you have support from family via a gifted deposit, but plan to keep some savings aside.

Offset mortgages are also helpful if you want the option to overpay in future, as you can do so informally through your linked savings, without committing to higher monthly payments.

That said, many first time buyers are focused on keeping upfront costs low, so it depends on your priorities. Your mortgage advisor will explain whether it’s worth exploring based on your situation.

Can I remortgage onto an offset mortgage?

Homeowners looking to remortgage in Manchester sometimes choose to switch to an offset deal, particularly if they’ve built up savings or want more control over how they repay their mortgage.

If your fixed rate is ending and you’re considering a new product, it’s worth checking whether an offset mortgage could save you money or help you reach the end of your term faster.

Offset mortgages can be a long-term strategy. Some people stay with them across several mortgage terms, particularly if they like the control and flexibility that comes with having a savings buffer that also reduces interest.

Speak to our mortgage experts

Offset mortgages can seem complex at first glance, but they’re worth exploring if you want a more flexible approach to managing your mortgage. At Manchestermoneyman, we can show you exactly how an offset deal could work for you, including how much interest you could save over the life of your mortgage.

Whether you’re a first time buyer in Manchester, a home mover, or looking to remortgage, our team can help you find the right mortgage for your personal and financial circumstances.

Book your free initial mortgage appointment today and speak to an experienced mortgage advisor in Manchester.

Date Last Edited: June 20, 2025