Moneyfacts research found the average offset fixed rate is now priced at 2.65%, over one percentage point lower than two years ago (3.68%). The average variable offset rate stands at 2.88% compared to 3.71% two years ago.
The cheapest two-year fixed rate offset is from Chelsea building society at 1.38% with a £1,675 fee. First Direct offers the cheapest variable rate at 1.29% for two years with a £1,450 fee.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said that cheap offset rates are another way lenders are competing with one another.
“Thanks to the record-low base rate, standard savings accounts currently offer poor returns, so many consumers are looking for better ways to use their cash savings. Offset mortgages can offer a genuine alternative.
“It makes sense for those with a mortgage to utilise their cash savings within an offset facility to pay off substantial sums on their mortgage and drive down the mortgage balance quickly. But, unlike overpayments, borrowers can access the cash whenever it is needed.
“One of the biggest criticisms of offset mortgages is that the rates tend to be higher than standard mortgages on the market. However, with rates reaching all-time lows, there has never been a better time for savvy borrowers to grab themselves an offset deal.”
