There has been speculation recently regarding the actual benefits to be gained from offset mortgages. These types of mortgage combine your savings and your mortgage, meaning you only pay interest on the amount in excess of your savings. But, this also means that you don't get interest on those savings.
At least one lender has recently claimed that unless you have at least £30,000 in savings, an offset mortgage will not be worthwhile because they claim rates are uncompetitive.
Our View
Any vehicle that reduces the amount of interest you have to pay out must always be considered. In our view, offset mortgages can benefit everyone with savings. If other loans have been consolidated into one mortgage, debit interest rates are likely to be lower. It is well known that lower rates of interest are available on mortgages than on loans and credit cards.
By having an offset mortgage, the amount of debit interest should be beneficial. For example, if your savings received 3% net interest but you were paying out 5% in mortgage interest, by not combining the two, you could be paying 2% more than necessary.
People need to take advice but offset mortgages should be considered and not immediately discounted if you do not have much in savings.