Offset Mortgages are commonplace in the UK and are generally associated with house-buying.

With an offset mortgage the borrower opens a mortgage account and banking accounts with the same lender. The interest on the mortgage is based on the amount of the outstanding mortgage less the balances in the bank accounts. For example, if the balance on the mortgage account is £150,000 and the balances on the savings and deposit accounts total £50,000, the borrower is charged mortgage interest on just £100,000.

There are some minor tax breaks associated with this type of mortgage as a result of non-payment of the bank account interest.

Within the UK, several high street lenders offer offset mortgages.

Another version of the mortgage is where the borrower pays off capital and interest each month as if the mortgage account were a standard Repayment mortgage (i.e. as if the offset arrangement did not exist). However, the interest charged to the mortgage account is less due to the offset arrangement, than the borrower actually pays each month. This means that the borrower effectively overpays the mortgage each month and pays off the mortgage account earlier than planned.

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