According to a study from Yorkshire Bank over a quarter (29%) of homeowners in the UK (approximately 4 million people) have their savings, current account and mortgage all with the same bank or building society but could be missing out on significant savings because they aren't combined as an offset mortgage.
According to Yorkshire Bank's calculations, by not combining their savings, current accounts and mortgages under one roof in an offset mortgage, homeowners are also potentially missing out on tax advantages. Rather than earning small amounts of interest on savings, offsetting mortgage debt enables customers to gain greater tax efficiency by effectively earning the mortgage interest rate. Collectively these homeowners could save up to £151million in tax over the coming year alone, according to Yorkshire Bank's calculations.
Gary Lumby, Yorkshire Bank's head of retail said: "The average homeowner who has their savings, current account and mortgage with the same bank but has not yet considered an offset mortgage could be missing out on a great opportunity.
"With the recent rises in the Bank of England's Base, many offset mortgage homeowners can see the positive balances in their savings and current accounts working even harder to offset the mortgage interest. With built-in payment flexibility there is also an option to overpay or underpay."
Yorkshire and Clydesdale Bank offer the widest range of mortgage products including a number of flexible mortgages and a two-year discounted offset lifetime tracker.
Hypothetical savings for homeowners switching from a standard 25 year repayment mortgage.
Years left to run on mortgage Mortgage amount Savings and current account combined Potential financial saving switching to an offset mortgage Potential time saving switching to an offset mortgage
*15.5 £84,000 £7,000 £11,660 1.3 years
15.5 £100,000 £15,000 £22,950 2.1 years
15.5 £250,000 £30,000 £47,670 1.7 years
*The average UK homeowner has an outstanding mortgage balance of £84,000, with 15.5 years left to run and a combined current and savings account balance of £7,000.
For further information on how you could make your money work harder for you and potentially pay off your mortgage years earlier, contact your local Yorkshire or Clydesdale Bank branch to arrange a meeting with a mortgage advisor or visit www.ybonline.co.uk / www.cbonline.co.uk for further information.