Offset mortgages are even better value when interest rates are low, says the Independent.
This is because of the big gap between savings rates – often below 1% – and mortgage rates, typically 3%. With the offset loan, instead of getting taxable interest on your savings, they are ‘offset’ against your mortgage interest, so effectively you earn the mortgage rate on your savings. On a £100,000 loan, someone with £7,500 savings could expect to save £7,500 in interest and cut their 25-year mortgage term by a year and a quarter.
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