Offset mortgages on the rise

The uptake on offset mortgages is on the rise as homeowners seek to beat poor interest rates on their savings accounts.

New offset mortgage lending rose by 16% in the last quarter of 2008 and looks set to continue rising.

Research by first direct, part of HSBC, found though that only 21% of homeowners say they understand that offset mortgages are a way of saving money on a mortgage.

Worryingly it seems that almost half of homeowners don’t actually understand the basic principle of an offset mortgage.

The benefits of these mortgages are being missed by many homeowners.

first direct found that by swapping to an offset mortgage, a £100,000 25 year mortgage could be reduced in length by 33 months and £18,322 could be saved in interest payments over the life of the mortgage.

Jimmy Kelly, first direct spokesman, commented ‘More and more savvy savers are starting to see their (offset mortgages) potential, helping them make the most of their savings pot, and forcing their money to work much harder.’

Over a million UK homeowners already have an offset mortgage.

The offset mortgage is becoming more competitive amongst mortgage lenders.

For example, earlier this month the Woolwich announced it was cutting the rates on its offset mortgages.

Yorkshire Building Society are also offering an Offset Plus deal which enables parents to offset their savings against the mortgage of a son or daughter.