The Offset benefit reduces the outstanding capital balance which in turn shortens the time it takes to pay off the mortgage. If you choose this option, your monthly mortgage payments may change.

E.g. if you had a £100,000 balance at a fixed rate of 4.40% over a 25 year term with an Offset mortgage,  and an Offset savings balance of £20,000 your term would reduce to 19 years and 10 months.
 

This example assumes a fixed interest rate across the entirety of the mortgage for illustration purposes only. When applying for an Offset mortgage a full illustration will be provided to you to confirm the associated costs and reversionary rates* of the recommended product for your circumstances. The example also assumes no change to the savings balance for the full mortgage term.

^{* A reversion rate is the interest rate your mortgage moves onto after the end of its initial term (e.g. a five year fixed rate mortgage will revert to our Standard Variable Rate (SVR) at the end of the five years - SVR is the reversionary rate).}

At the end of each month, the Offset benefit automatically reduces the amount we collect by Direct Debit (you must pay by Direct Debit) by the same amount for the next monthly mortgage payment, or the month after that, depending on when the payment is due.

Mortgage payments made before the 7th of the month may result in the Offset benefit reducing your monthly payment a month later.

You’ll still pay your mortgage for the full term, but depending on how much money you have in your Offset savings account, you pay less mortgage interest each month.

E.g. If you had a £100,000 balance on a fixed rate of 4.40% over a 25 year term. Without an Offset mortgage, your regular payments would be £550.17 per month. However, if you had an Offset mortgage, with an Offset savings balance of £20,000 your payments would reduce to £476.84 per month.

This example assumes a fixed interest rate across the entirety of the mortgage for illustration purposes only. When applying for an Offset mortgage a full illustration will be provided to you to confirm the associated costs and reversionary rates of the recommended product for your circumstances. The example also assumes no change to the savings balance for the full mortgage term.

The key feature of an Offset mortgage is that any money in your linked savings account reduces the amount of interest you pay on your mortgage – we call this the Offset benefit.

To ensure you use your linked savings account in the best way:

• Make sure your savings balance isn’t greater than your mortgage balance, as you won’t receive any benefit on the excess amount.
• Keep the balance in your linked savings account above zero, as you won’t receive any Offset benefit on your mortgage.

If your Offset mortgage (repayment or interest-only) is on a variable interest rate it’s subject to interest rate changes throughout its life. This means that your savings interest rate is also subject to the same changes.

As your Offset interest is added to the account on the 1st of the month and the Offset benefit is applied on the first of the following month this means that your monthly payment in the month your mortgage interest rate changes will be different to what you would normally expect.

If interest rates increase your mortgage payment will be higher the first month of the change. And your Offset benefit will rise the following month which will show in your mortgage payments.

If interest rates decrease you’ll pay less for your mortgage in the first month of the change, and your Offset benefit will be higher until the following month as the rate change won’t affect the savings account until then. After this, your new payment will show the decreased interest rate on both the mortgage and Offset benefit.

You can make overpayments on your Offset mortgage in a number of ways – small ad hoc overpayments, larger lump sum overpayments and regular overpayments. Early Repayment Charges (ERCs) may apply. Your mortgage offer will contain details of the maximum amount of overpayments that are allowed and any charges that may apply.

But remember, after you’ve made an overpayment into your mortgage account you won’t be able to access it again, so if you think you might need the money in future you might be better off saving it in your Offset savings account instead. That way, you’ll receive a greater Offset benefit and have access to the money whenever you need it.

The interest on your mortgage account is calculated daily and added to your mortgage account on 1st of each month. The Offset benefit on your savings account is calculated on close of business on the last day of each month and applied to your mortgage account on 1st of the following month.

This means if your mortgage starts on 1st January and is for £200,000, and you add the same amount to your savings account at the earliest opportunity, you will still need to make your first monthly payment in full. On 1st February your Offset benefit for January is applied to the mortgage and this will then reduce your February mortgage payment.

So, in some months you will still need to make a payment as the Offset benefit interest is lower than the mortgage interest (e.g. February only has 28 days so the Offset benefit payment made 1st March will be lower than the mortgage interest added 1st March)*.

_{* This information is for illustrative purposes only and individual mortgage balances will differ.}

If you apply to transfer (we call this ‘porting’) your Offset mortgage to another property, we’ll set up a new Offset mortgage and savings account for you when the purchase is complete.

What you’ll need to do:

1. Let us know whether to cancel or transfer any existing standing orders and Direct Debits. We can’t do this without your permission.
2. Transfer any money into the new Offset savings account. We can’t do this automatically for you.

If your mortgage is repaid, transferred to another property, or transferred to a non-Offset mortgage, we’ll transfer your original Offset savings account into a new instant access account.