When you get really deep into exploring your mortgage options you might start coming up on terms beyond the usual “fixed” or “variable rates”. For example, you might see some lendingers offering something called an ‘offset mortgage’. And yes, these sorts of mortgages are less common than your standard deals but that doesn’t mean you should ignore them. In the right circumstances offset mortgages can be extremely efficient.

So do banks still offer offset mortgages in the UK today?

This guide will answer that question, explain exactly what offset mortgages are, how they function, detail the potential advantages and disadvantages and help you figure out if this unique type of mortgage could be a good fit for your financial situation.

 

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What are offset mortgages?

In essence, an offset mortgage is a home loan that links your mortgage account directly to one or more of your savings accounts held with the same lender. So instead of earning interest on your savings, the balance in your linked savings accounts is ‘offset’ against the amount you owe on your mortgage.

This means you only pay interest on the difference between your total mortgage debt and your total linked savings balance.

OK, but how do offset mortgages work in the real world?

Here, it’s probably easiest if we use a simple example. Imagine you have:

  • A mortgage balance of £200,000
  • Linked savings of £30,000

With an offset mortgage you would only pay interest on £170,000 (£200,000 – £30,000).

This reduction in the interest charged can benefit you in two main ways depending on the specific product and your choice:

  • Reduce your mortgage term when you keep making the original monthly payment amount (based on the full £200,000). As less of it is going towards interest, more goes towards repaying the capital. This has the effect of shortening the overall mortgage term significantly.
  • Reduce your monthly payments when you opt to pay less each month, reflecting the lower interest being charged keeping the original mortgage term (but note, this option is less common and may require specific agreement).

Crucially in almost all cases, your savings remain accessible. So if you need them you can access them, although withdrawing savings will reduce the offset benefit and increase the mortgage balance you pay interest on.

So are offset mortgages still available?

The short answer is “Yes”. Some UK lenders do still offer offset mortgages in 2025 However they are certainly less common than standard fixed-rate or variable-rate deals. You’re more likely to find them offered by certain banks and building societies, perhaps targeting customers with substantial savings or those seeking more flexible financial management (like higher-rate taxpayers or some self-employed individuals).

Because the market for offset mortgages is smaller, availability can quickly change. As a result, it’s probably best to check the current offerings from lenders directly or use a whole-of-market mortgage broker who can identify which lenders provide offset products.

What to consider with offset mortgages

Offsetting can be a powerful tool but remember to weigh these points carefully:

Pros

  • Offset mortgages can potentially save you a significant amount of mortgage interest over the loan term.
  • With an offset mortgage, the interest you save isn’t taxed. This is different to interest you might earn in a standard savings account, making it particularly beneficial for higher-rate taxpayers.
  • You can usually still access your linked savings if needed (though this impacts the offset benefit).
  • Offset mortgages effectively allow you to overpay your mortgage using your savings balance, potentially clearing the debt faster.

Cons

  • Offset mortgage interest rates might be slightly higher than comparable non-offset deals.
  • They require a decent amount of savings to make a meaningful impact on interest charges.
  • You forgo earning any interest on your linked savings balance.
  • There’s less choice compared to the standard mortgage market.
  • Offset mortgages need financial discipline not to spend the linked savings required to reduce the mortgage interest.

Are offset mortgages right for you?

An offset mortgage isn’t for everyone but could be a good option if:

  • You pay higher-rate income tax (as the tax saving on mortgage interest saved is more valuable).
  • You consistently hold significant cash savings (e.g. for tax bills emergencies or future plans) that you don’t need immediate day-to-day access to.
  • You are disciplined with your savings.
  • You want the flexibility to potentially pay off your mortgage faster using your savings buffer.

However, they might be less suitable if:

  • You have limited savings.
  • You are a basic-rate taxpayer (you might earn more interest in a high-interest savings account even after tax compared to the offset benefit especially if the offset mortgage rate is higher).
  • You prioritise securing the absolute lowest headline mortgage interest rate.
  • You prefer complete separation between your savings and mortgage.

As always, careful calculation is needed comparing the potential interest saved via offsetting against the interest you could earn elsewhere, particularly considering any difference in the mortgage rates themselves.

OneDome is here to help

Choosing a mortgage is complex but OneDome is here to help. If you have any questions about whether to opt for traditional or offset mortgages, the wider mortgage process or want tailored advice on the different types of mortgages that suit your situation speak to our friendly mortgage advisors today or call us on 01489555080 or explore our comprehensive mortgage guide for a more in-depth breakdown.

Important: Your home may be repossessed if you do not keep up repayments on your mortgage.