With saving rates falling and the difference between standard fixed-rate and offset mortgages having flipped borrowers have been told it may be a good time to consider a change.
The average 2-year fixed rate offset product has now dropped below 2% and is available at just 1.90% whilst the average 5-year fixed rate offset now sits at just 1.96%.
These rates are usually higher than those offered on standard mortgage products, but currently compare favourably against the average two and 5-year rates for standard mortgage products, which currently stand at 2.11% and 2.37% respectively.
Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “As savings rates continue to fall, and with the current circumstances meaning they are likely to continue doing so for the foreseeable future, getting a decent return on any nest egg may seem a distant dream for many.
“However, one alternative way of utilising savings funds that may be due a resurgence is the option of an offset mortgage product.
“With rate margins so low, mortgage providers are keen to show that they offer a diverse range of products to appeal to as many borrowers as possible. While the number of offset deals available has reduced over the last 12 months, the rates themselves now seem to be keeping pace with the competition we have seen across the wider, mainstream mortgage market.
“Traditionally, offset mortgage rates were significantly higher than their standard counterparts, but this no longer seems to necessarily be the case.
“Some consumers may now benefit from exploring whether it is worth making the switch over to combine their savings and mortgage.
“Once on the property ladder, the main aim for many is to pay their mortgage balance off as quickly as possible. As a general rule, if a borrowers mortgage rate is higher than the interest rate they are currently earning on their savings, then they may find that they can save more by repaying their mortgage than they would receive in savings interest, particularly if they pay tax on the latter.
“Those who think they may benefit from an offset mortgage deal should consider their next steps carefully. Seeking independent financial advice could be invaluable in ensuring they select the right option for their circumstances.”
According to Moneyfacts.co.uk research, the number of available offset products has reduced significantly compared to last year, dropping by 115 and reflecting the contraction that has been seen across the wider mortgage market in recent weeks.