Yes, effectively you will have an interest free loan.You will have a choice of whether to keep your mortgage payments at the normal level and thus pay off your mortgage quickly or to reduce your monthly payments so you pay off the mortgage in the agreed number of years. You could decide to make over-payments and pay it off really quickly.Because of the way my income happens I usually have my mortgage almost fully off-set for part of the year and only partly off-set for the rest of the year. I say almost fully off-set because I tend to leave slightly under the full amount as you don't receive interest on any surplus money in the parts of the account you have nominated for off-setting and I am too lazy to move money around enough to absolutely maximise the accounts full potential. Basically you can have several different 'savings pots' within the account all with different names, such as holidays, rainy day, current account, new kitchen, etc and choose which of them you want to off-set against the mortgage and which (if any) you want to receive interest on. It's a very easy account to operate and understand and makes keeping track of your money really simple. It may be possible to get a slightly cheaper mortgage or a slightly better return on your savings if you really work at it but personally I don't have the time or inclination to spend hours researching deals and then applying for them, only to find that a better deal is offered the following week.

Thanks Joey - it all sounds pretty good so far.

I just have one more question....

...what happens when the mortgage equals the amount of savings in the offset accounts? Am i expected to repay the mortgage immediately thus losing all my savings, or effectively carry on with an 'interest free' loan?

I have had a Woolwich off-set mortgage for several years and find it works really well for me.The things you need to consider are:1. How much money you have in savings (probably not including ISAs) and how accessible you want it to be. 2. How often you get paid and when during the month you pay your bills.3. What rate tax payer you are.4. Is it a life-time tracker (in which case you won't need to keep paying fees to re-mortgage)?One of the main attractions of an off-set mortgage for me is the fact that my savings are totally accessible. It may be possible to do slightly better by putting money in bonds or regular savings accounts but that depends on whether you have the time to keep checking on what rates are available and then moving money around accordingly. I always use my ISA allowance though.If you get paid 2 or 3 weeks before your Direct Debits leave your account this helps an off-set mortgage quite a lot. One of the really satisfying features of the Woolwich off-set mortgage is the fact that every month you can see on your statement a running total of how much interest you have saved paying.

Hi all,

I have just spent all evening reading about offset mortgages and am a little confused (which isn't unusual )

I was hoping someone may be able to advise me on my situation.

I've been thinking of switching from my traditional tracker mortgage to an offset mortgage, but cannot work out if it would be to my advantage or not.

I have a mortgage of about £81k which I can switch to a tracker for 3 years currently at 5.79% with my current lender (£599 set up fee). BUT I also have savings of £25k which split between a current, savings & ISA account each earning approx. 5%. I have seen an offset tracker mortgage deal with Woolwich at 0.99% above base rate (5% + 0.99% = 5.99%). Set up fee is £995 for the offset, free legals and valuation, which sounds a good deal.

I wouldn't expect my savings to fall below £20k in the next 3-5 years. My question is whether I have enough savings to make this type of mortgage work for me or not?

Any advice would be more than welcome, Thanks in advance.