Offset mortgage rates have fallen over the past five years, according to Moneyfacts.

The financial information provider said that the average offset fixed rate has dropped from 4.03% in October 2011 to 2.30% today. Average offset variable rates have fallen from 3.43% to 2.71% over the same time period.
 
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Borrowers with a separate mortgage and savings account are currently faced with rock-bottom savings rates, meaning they get little return for stashing their cash. By combining the two products into an offset mortgage, borrowers will not only be able to reduce the size of their mortgage, but save thousands of pounds in mortgage interest.  

Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “With interest on savings accounts dwindling, it is a difficult time for many savers. However, those who have a mortgage could look elsewhere to see if their nest eggs can work even harder for them; an offset product could provide a genuine alternative.”

For example, based on the average two-year fixed rate for an offset (2.02%) and non-offset product (2.38%), a borrower would save £742 in just one year years and shave a year off the term of their mortgage, based on £150,000 mortgage amount over 25 years and £10,000 savings pot.

Nelson added: “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.”