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Offset mortgages

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What is an offset mortgage?

Offset mortgages involve linking your mortgage to your savings account, reducing your overall interest payments. Your savings account and mortgage normally needs to be with the same bank/building society.

The total balance saved in your linked savings account is taken from what you owe on your mortgage. The amount left in your mortgage is then used to calculate a lower mortgage interest for you to pay.

If you link your mortgage, you'll no longer earn interest on your savings account. But you might save more in interest with an offset mortgage than you’d earn on a savings account.

For example, a £200,000 mortgage with £20,000 in savings means you only pay interest on £180,000. You won’t earn interest on your savings, but you could save more on mortgage interest overall.

How much can I save if I offset my mortgage?

The more savings you can offset against your mortgage, the more you’ll save on interest payments.

Let’s use our £200,000 mortgage example again:

If you save £6,000 in your offset savings account with a 3% interest rate over a 25-year mortgage term, you could save £4,440 over the term.

But if you save £20,000 at the same rate over the same term, you could save £14,540 in interest over the term. This works out at £580 per year.

What our mortgage expert says

"Offset mortgages aren’t just about reducing interest. they’re most powerful for people with fluctuating savings or irregular income. Because your savings can sit there as a buffer, you keep full access to your money while still lowering your mortgage interest, which can be far more flexible than overpaying and locking those funds away."

Ashlyn Trojnacki Mortgage Expert

Can I still access my savings with an offset mortgage?

Yes, you can access and withdraw from your offset savings account whenever you like.

But remember that if you choose to withdraw money, you're reducing the amount you can offset against your mortgage. This means your monthly mortgage payments may increase.

Some lenders can also insist that you keep a minimum amount of savings for your offset mortgage.

If you want to spend your savings, you could think about changing mortgages and finding out what type of mortgage is best for you.

Can I pay my mortgage quicker with an offset mortgage?

Yes, you can. You could choose to overpay your mortgage either by increasing your monthly payments or with a lump sum.

But you should check with your lender before you do this, as there is normally a limit to how much you can overpay before you face early repayment charges (ERCs).

If you would prefer to have your money accessible, you could instead pay more into your savings account to reduce your monthly interest charges. The right decision for you will depend on your individual circumstances.

Advantages and disadvantages of offset mortgages

Advantages of offset mortgages:

May be higher interest savings than interest saved from a savings account
You still have access to your savings
You'll pay no tax on the interest you save
You can help first-time buyers with an offset mortgage by offsetting your savings against their mortgage

Disadvantages of offset mortgages:

There can be higher interest rates with an offset mortgage
You won’t earn interest on your savings if you use them to offset your mortgage
If you draw from the savings you’re using to offset your mortgage, your monthly mortgage interest payments will increase
You may need to save for a bigger deposit for an offset mortgage. Some lenders ask for 25% of the property value
There’s not a huge variety of offset mortgages on the market
Some lenders ask for a minimum amount of savings to open an offset mortgage

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Tips & guides on offset mortgages

Early repayment charges explained

An early repayment charge, or ERC, is a fee that’s paid to your mortgage lender for paying off some types of mortgages early.

Overpaying your mortgage?

Mortgage overpayments are when you pay more than your normal monthly mortgage payment. This lets that you pay your mortgage off faster and you could pay less interest overall.

Loan to value explained

What is loan-to-value (LTV) and what does it mean for buying a house?

How do you save for a deposit

We look at the different ways you can make a mortgage more affordable

See all mortgage guides

Offset mortgage FAQs

Can I offset 100% of my mortgage?

You can, and you won't get charged any interest at all on the months where 100% of your mortgage is offset by your savings.

There's usually no limit on how much you can offset from your savings account.

How do offset mortgage work with tax?

Most people pay tax on their savings unless it's an ISA account. For savers with an offset mortgage, the money is tax-free. When you have an offset mortgage, you won't earn any interest on your savings but you'll pay less interest on your mortgage.

Is it better to put down a bigger deposit instead of offsetting?

It depends on your personal circumstances. If you have a bigger deposit, you might benefit from lower interest rates on your mortgage. But once you’ve put down the deposit you won’t be able to get it back.

With an offset mortgage you have savings for the future when you’ve paid off your mortgage. But if you withdraw from your savings before then, your monthly payments could increase.

You can speak to our broker partner, Mojo Mortgages, who can help compare the best offset mortgages for you against standard mortgages with the deposit you have.

Reviewed by Ashlyn Trojnacki Mortgage Expert Updated on 27 March 2026

YOU SHOULD THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME/PROPERTY. YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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