Fixed rate offset mortgages now average at just 2.30%, down from 2.60% in October last year and 3.53% the year before, Moneyfacts data shows.
Typical offset 2-year fixes now stand at 2.02% compared to 2.38% for non-offset products, meaning a borrower could save £742 in one year based on a £150,000 mortgage amount over 25 years and £10,000 savings pot.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, reckoned offset mortgages are becoming more of a viable option.
She said: “With competition high in the mortgage market, providers are keen to stand out from their competitors by showing they offer a diverse range of mortgages at great prices, and offset products only enhance their offerings further.
“An offset mortgage is the ultimate flexible product, as it allows borrowers to reduce the interest paid on their mortgage while simultaneously having instant access to their savings pot.
“Despite the personal savings allowance firmly in place the tax benefits an offset mortgage is still a consideration for many. The reductions in the average offset fixed rate and price are only going to boost its appeal.”
She added: “However, when mortgage rates have reached their low point, borrowers should keep in mind that there could be better deals out there.
“For instance, the lowest five-year fixed deal at 75% loan-to-value is priced at 2.05%, 0.23% less than the lowest five-year fixed rate offset deal. Borrowers looking to get the most out of their savings will therefore need to decide carefully whether the extra flexibility is worth paying for.”
Offset variables stand at 2.71% after rising from 2.63% in October 2015. However they are still lower than an average rate of 3.11% in October 2014.