Almost half of homeowners do not understand the benefits of an offset mortgage and a further 35% only roughly know how they work.

40% of homeowners questioned in a survey commissioned by First Direct Bank failed to understand the benefits of offset mortgages and 35% only had a vague idea about how these mortgages work.

These findings show that many consumers may be missing out on the savings that can be made when taking out an offset mortgage.

Interest accrued on the savings in the account can be offset against mortgage interest and can reduce the term of the mortgage.

Depending on the amount if interest accrued, mortgage cost savings can be significant.  For example, figures from first direct show that swapping to an offset mortgage could cut down the length of a £100,000, 25 year mortgage by four years and save £24,232 in interest payments over the lifetime of the mortgage

Pointing to the lack of awareness of the benefits of this type of mortgage, Jimmy Kelly, first direct’s Head of Mortgages, said: “It’s a real worry that consumers are not aware of the benefits of an offset mortgage.”

“Not many people know, for example, that our market leading fee free offset tracker would have the equivalent savings rate of 5.10% for higher earners.”

Nicola Daglish, Director/Managing Consultant of Recruitment Company, who has an offset mortgage from first direct explains some of the benefits:

“When I contacted first direct they really explained how offsetting worked and how it could benefit me including making unlimited overpayments to reduce the term of my mortgage, offsetting my savings to avoid tax and having the ability to redraw back to my original borrowing limit should I need the cash.”

“Looking to the future I can see loads of ways my offset could help me for example I’m getting married soon and the way the costs are piling up I might need to redraw again! However, when times are good I always know I can make overpayments shortening the length of my mortgage…”
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