Offset mortgage - do they work?

[suzi-q]

We need to remortgage in September due to the end of a low interest period.

I am thinking of a "one" account or offset mortgage.

Are they as good as they sound? Has anyone got one?

[matchmade]

I have an offset and it's well worth it, provided you don't get charged a higher interest rate. The advantage is that you will be earning a really high effective interest rate on your money: it's the mortgage rate plus the tax payable if the money were stuck in an interest-bearing account. In other words if your mortgage interest rate is 5%, an deposit account would have to offer 6.4% as a basic-rate taxpayer and 8.3% if you're higher-rate, to give equivalent benefit. Where are you going to get a reliable 8.3% nowadays? Far better to pay your salary direct into a bank account which is offset against your mortgage account.

t's also great to see your mortgage visibly diminishing every month in your bank statements. All this by leaving your money in your offset bank account, just as you would be doing anyway with another bank but only getting 0.1% on your money! See the Clydesdale Bank who are well organised here. You can also set up offset deposit accounts, with the same effective interest rate - a useful place for your rainy-day money.

[Postdog]

I use Intelligent Finance (part of the Halifax group) who operate in a similar way to the One account. I wouldn't use any others now.