If the Bank of England votes to make two more increases during 2007 and takes interest rates to 5.5 per cent, an offset mortgage will enable you to dodge any ill effects on your monthly repayments and allow you to sleep easy once again.
Offset mortgages can be fairly straightforward and encourage better financial awareness; a homeowners money held in a savings or current account is offset against the money which is owed on their mortgage. This reduces the overall debt as interest is then only accrued on the reduced loan amount.
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The difference thus means that borrowers should not only look at the rates offered, but also the features of the mortgage itself which could benefit them in other areas. Some lenders allow loans, credit card borrowing and mortgage borrowing all at the same rate, and others such as Clydesdale Bank allow up to six other accounts to be offset alongside the mortgage.
Louise Cuming, head of mortgages at moneysupermarket.com advises: Taking a holistic view to mortgages and savings can be a much more effective way to manage borrowing. Many households looking for a new mortgage would be better off with an offset mortgage, yet they only account for a minority of the market.
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