Offset mortgages are a new variation on the flexible mortgage theme. The Offset Mortgage has all the same features as a Flexible mortgage option dealt with on the previous previous page. The added bonus here is the way numbers of different accounts are linked together. Typically this will be the mortgage account, a loan account and up to 3 savings accounts.
The big advantage is that the savings are “Offset” against the mortgage. So if you have a mortgage of £100,000 and savings of £5,000 you will only be charged interest on the £95,000. This effectively means your savings are “earning” interest at the mortgage rate, which is generally higher. Also interest earned on a savings account is normally taxed at 20 or 40%. With Offset the saver is effectively getting tax free benefits.
Most lenders only allow savings accounts to be "offset", not current accounts. As far as we are aware Natwest is fairly unique in the fact that it will allow business accounts to be "offset".
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OFFSET MORTGAGE