Why the offset rate is higher

An offset deal usually carries a higher rate than the same lender's ordinary mortgage. This page sets out the fair way to weigh that higher rate against what offsetting does for your balance.

Why the comparison has to be at the same lender

An offset mortgage and its non-offset equivalent from the same lender are usually priced differently, and the offset version is typically the higher one. The question that follows is what you compare that rate to.

Same lender, because the rest of the deal is the same

A lender builds its offset and non-offset products on the same funding and the same underwriting. The only thing that changes between the two is the offset feature itself, so the rate gap between them is the actual cost of that feature. Set the offset rate against a different lender's best-buy rate instead, and the comparison picks up everything else that differs between two lenders as well, which has nothing to do with offsetting.

Fix against fix, tracker against tracker

The product type has to match too. A fixed rate and a tracker respond to different things, a tracker moves with the base rate and a fix does not, so a fixed-rate offset deal needs to be measured against the same lender's fixed-rate non-offset product, and a tracker offset deal against that lender's tracker. Comparing a fix to a tracker brings in a rate difference that belongs to the product type, not to the offset decision.

Once you have the two rates from the same lender and the same product type, the gap between them is the figure that matters: what the offset feature costs you, against what it saves you by reducing the balance interest is charged on. That is the comparison worth running, and it is the one the calculator on Offset-Mortgage.co.uk is built to take. The mechanism behind the saving is set out in full on how offsetting works.

How to compare the two rates fairly

A rate on its own doesn't tell you whether offsetting is worth it. The comparison that means something is the one against the same lender's non-offset version of the same deal, run through your own figures.

  1. Find the matching non-offset product

    Ask the same lender for its non-offset deal of the same type and term as the offset product you're looking at. The rate on a different lender's best-buy deal doesn't tell you what offsetting itself is costing you, because the two products differ in more than just the offset feature.

    Fixed-rate offset

    Compare it against that lender's fixed-rate non-offset product, same term.

    Tracker offset

    Compare it against that lender's tracker non-offset product, same structure.

  2. Enter both rates into the calculator

    Put the offset rate and fee in one set of fields and the non-offset rate and fee in the other, alongside your mortgage balance, remaining term, and the cash you hold. Nothing is published on the site for you to look up; both rates come from your own mortgage illustration or the lender's offer documents.

  3. Read the result in pounds

    The result shows what the offset deal saves against the non-offset rate over the term you've set. That figure is what tells you whether the offset deal is worth it on your balance.

    The calculator works from what you enter, so a wrong rate or term in either box will give you a wrong answer.

Both rates are usually stated side by side in a lender's mortgage illustration. Where they aren't, ask for the non-offset equivalent directly before running the comparison.

Why offset isn't always offered as both a fix and a tracker

Not every lender builds its offset range the same way. Some offer offset only as a tracker, some only as a fix, and some offer both. That choice sits with the lender, not with the borrower, and it shapes which comparison you can actually run.

What it means for the comparison you can make

A fair comparison sets an offset deal against the same lender's non-offset equivalent of the same type: fix against fix, tracker against tracker. If a lender only sells offset as a tracker, there is no fixed non-offset deal from that lender to set it against. The comparison you can run at that lender is tracker against tracker, or none at all.

A tracker rate moves when the base rate moves; a fixed rate does not. That difference carries its own effect on the numbers over the mortgage term, separate from whatever gap exists between the offset and non-offset rate. Two deals that look close today can move apart later for a reason that has nothing to do with offsetting.

What to check before you compare

  • Whether the lender offers the non-offset version in the same rate type: fixed term for fixed term, tracker for tracker
  • Whether both deals run for the same length of term
  • Whether the offset deal you are looking at is the only product type that lender sells with offset attached

Where a lender offers only one type with offset, you are left comparing within that type, or comparing against a different lender's offset deal of the same rate type rather than against a non-offset product. The calculator on this site takes whichever rates you enter and works the figures from there; it does not supply rates for you.

Questions about comparing offset rates

Does the higher offset rate always cancel out the saving from offsetting?

Not necessarily. The extra you pay on the rate is a cost that applies to your whole mortgage balance, while the saving from offsetting applies to the cash you hold against it. Whether one outweighs the other depends on how much cash you hold, for how long, and your income tax band. Those are the figures the calculator on the home page works through for you.

Why doesn't this site publish offset rates for you to compare?

Offset rates vary by lender and by product, and they change often enough that a published figure would be out of date quickly. The calculator asks for the rate on your own offset quote and the rate on the same lender's equivalent non-offset product instead, so the comparison reflects what's actually been offered to you.

How do I compare an offset deal against an ordinary mortgage fairly?

Compare it against the same lender's equivalent non-offset product. A fix should be set against a fix, and a tracker against a tracker. That pairing isolates the cost of the offset feature itself from differences between lenders or product types that have nothing to do with offsetting.

Why does it matter whether I'm comparing a fix with a fix?

A fix and a tracker carry different risks and are priced differently for reasons that have nothing to do with offsetting. Setting an offset fix against a non-offset tracker mixes that pricing difference in with the cost of the offset feature, so you can't tell how much of the gap is actually down to offsetting.

My lender only offers offset as a tracker. What can I compare it against?

Some lenders offer offset only as a tracker, and others only as a fix. Where that's the case, the fair comparison is still the same lender's non-offset version of that same product type, a tracker against a tracker. If the lender doesn't offer a non-offset version at all, you won't have a like-for-like figure from that lender to compare against.

Where can I check which lenders offer offset mortgages?

A list of UK lenders offering offset products is kept on the lender directory, with the source read for each one. It isn't ranked and carries no rates, so you'd still need to get the current offset and non-offset rates from the lender or a mortgage adviser before entering them into the calculator.