An offset mortgage is a good way to save on the amount of interest you pay on a mortgage over its term, and are a good choice for those with large amounts of savings.
By linking a savings account with a mortgage, the savings can be offset against what you still owe the bank, reducing the amount of interest you have to pay.
For example, if a mortgage is £200,000, and the borrower has savings of £15,000, and they use these savings in an offset mortgage, they will only pay interest on £185,000.
This makes offset mortgages very useful, but will only work if the savings are with the same lender who is offering the mortgage. Also, the interest rates may be slightly higher than on a standard variable rate, and so you need to take the time to do the sums and figure out if an offset mortgage would actually save you money.
You will need to read the terms and conditions carefully, and ensure that you will still have access to the savings that you want. If it Is a savings account with instant access, will the access remain instant if that account is used in an offset mortgage?
Furthermore, savings earn interest, but for those used in an offset mortgage, it is likely that they will earn none. You need to make sure you know how the interest on your savings will be affected, and whether it will be financially worth it when everything is taken into account.