Huge surge in Offset mortgages

The number of offset mortgages has surged in the past year, according to the Council of Mortgage Lenders (CML).
Last year, 170,000 offset mortgages, worth nearly £30bn, were taken out, a 49% increase over the past year.
Experts suggest that the increased popularity is due to offset mortgage rates becoming more competitive when compared to fixed rate loan deals as they allow borrowers to offset savings and current account balances against their mortgage debt.
They are designed to be flexible, allowing the borrower to make over-payments and under-payments on the loan. Paying less interest can allow the borrower to repay their mortgage debt sooner.
For example, someone with a mortgage debt of £100,000 and £10,000 in savings would only pay interest on £90,000 of the loan.
Offset mortgages originated in Australia and came to the UK in the mid 1990s and when introduced to the UK, they initially proved popular as they were heavily marketed by banks and building societies like Northern Rock, Abbey, Mortgage Express and Barclays.
But their popularity was usurped by more competitive fixed-rate mortgage deals. However, recent rises in interest rates mean that fixed-rate deals have become more expensive, which has led to people switching back to offset mortgage deals.
"There has been a turnaround in the fortunes of offset mortgages," Andrew Montlake, director of mortgage brokers Cobalt Capital, said.
"Fixed-rate mortgage rates have gone up making offsets more competitive. I think that, finally, after more than a decade, the offset mortgage concept has eased into the public consciousness," Mr Montlake added.