NatWest, and sister bank Royal Bank of Scotland, will take on the offset mortgage market in the early autumn, according to Charles Haresnape, head of mortgage sales at NatWest.

Haresnape said systems were being developed to cater for the new product and commented: “We see ourselves as being a major player in the market. We have one of the biggest current account bases in the market, and the challenge is to attract mortgage customers. I think this is easier than the task facing mortgage banks trying to attract current account business.”

The product will be distributed both through intermediaries, and direct to the customer. Haresnape said he had seen increasing demand from intermediaries for offset products, and said independent advice would be an important part of getting the product into the market.

Rob Clifford, managing director of intermediary mortgageforce agreed the market would expand and commented: “I think it will grow as more lenders have systems capability and develop an appetite to offer it.”

However, he said at the moment the market is being held back by two main factors. He said: “There are two things to look out for. The first is customer psychology and the second supply of product. Not all lenders have an offset proposition and we still have this massive consumer psychology that all your eggs in the one basket is the wrong, not the right, thing to do.”

Haresnape said that once NatWest and the Royal Bank of Scotland have released their products, offset mortgages would be rolled out by other group members, including Direct Line.

The move will see NatWest and Royal Bank of Scotland products going head-to-head with the likes of HBOS, Abbey, The Woolwich and Bristol & West, which has recently entered the market.

Andy Gray, head of mortgages at The Woolwich, said it held between 10% and 15% of the offset market and expected to grow this to between 15% and 20% in the next three years. He welcomed the news that more players would be offering offset products and commented: “We would be pleased to see new lenders coming into this area. Anything that raises the profile of the market is a good thing.”