Offset Mortgage vs Savings Calculator UK

Compare an offset mortgage with a standard mortgage plus separate savings using your own quotes, with the model’s tax and repayment assumptions explained.

Last checked: 21 October 2026 (tax year 2026/27).

The short answer: an offset mortgage is usually worth it when you have a large amount of savings you want to keep easy to reach, and the savings interest you’d earn after tax is less than your mortgage rate. If the offset rate is a lot higher than a normal mortgage, or your savings are small, a normal mortgage plus a good savings account (or an ISA) often comes out cheaper. Put your own quotes into the calculator below to see which wins for you.

I’m not a financial adviser or a mortgage broker, and this is general information, not advice. Mortgages are complicated and very personal, so speak to a whole-of-market broker, or use the free guidance at MoneyHelper, before you choose a deal. See my financial disclaimer.

This offset mortgage calculator UK compares an offset arrangement with a standard repayment mortgage and separate savings. Enter the rates from actual quotes, then read the assumptions alongside the result. The lowest headline mortgage rate does not, on its own, answer the comparison.

Offset mortgage vs savings calculator (UK)

Compare an offset mortgage with a normal mortgage plus a savings account, after tax. Use the rates from real quotes you’ve been given.

Your mortgage

Your savings

What is an offset mortgage?

With an offset mortgage, your savings sit in an account linked to your mortgage. Instead of earning interest, they reduce the amount of mortgage you pay interest on. If you owe £200,000 and have £30,000 in the offset account, you’re only charged interest on £170,000.

Your savings don’t disappear. You can usually take them out whenever you like (check your lender’s rules), and the interest goes back up when you do. That flexibility is the big selling point.

Most lenders keep your monthly payment the same, so the interest you save goes towards paying off the mortgage faster. Some let you lower your monthly payment instead.

Why the tax side matters

This is the part most people miss. Money in an offset account doesn’t earn interest, so there’s no tax to pay. The saving is the mortgage interest you don’t pay. Interest from a normal savings account, though, can be taxed once it’s over your Personal Savings Allowance.

Income Tax bandPersonal Savings AllowanceTax on savings interest above it (2026/27)From 6 April 2027
Basic rate£1,00020%22%
Higher rate£50040%42%
Additional rate£045%47%

Sources: GOV.UK: tax on savings interest and LITRG (the savings tax rates rise by 2 percentage points from 6 April 2027, announced in the Autumn Budget 2025). The calculator leaves out the £5,000 starting rate for savings, which only helps people on low incomes.

So for a higher-rate taxpayer, offsetting savings at a 4.5% mortgage rate avoids mortgage interest at 4.5% on the amount actually offset. To match that in a taxed savings account (once your £500 allowance is used up), you’d need to earn 7.5% before tax. That’s why offsets are popular with higher-rate taxpayers and people with big savings pots. If you’re a basic-rate taxpayer with modest savings, your allowance may cover all your interest, and the tax advantage disappears.

How to use the calculator

  1. Use real quotes. Get an offset rate and a normal rate for the same length of deal (for example, both 2-year or both 5-year fixes), with their fees.
  2. Enter the savings you’d actually keep in the offset, not money you’ll spend soon. Your emergency fund is a good example.
  3. Enter the best savings rate you could really get on that money, such as an easy-access account.
  4. Pick your tax band, and say whether other savings already use up your Personal Savings Allowance.
  5. Compare. The calculator shows the net cost of each option over the deal: mortgage interest, plus the fee, minus any after-tax savings interest.

Try changing one number at a time. You’ll quickly see how much the rate gap and your tax band matter. The tax selector is a scenario comparison, not a date-based tax calculation. It applies the selected rates throughout the period and does not split a deal across 6 April. If your deal crosses a tax-year boundary, neither scenario is an exact tax forecast.

When an offset mortgage is usually worth it

  • You have a large savings pot compared with your mortgage, and want to keep it easy to reach.
  • You’re a higher or additional-rate taxpayer, or your savings interest is already over your Personal Savings Allowance.
  • Your ISA allowance is already used, so you can’t shelter more savings from tax.
  • You’re self-employed and keep a tax pot. That money can work against your mortgage until the tax is due.
  • You’re saving up for something big, like building work, and want the cash cutting your interest until you need it.

When a normal mortgage plus savings often wins

  • The offset rate is much higher than the best normal deal, and your savings only cover a small part of the mortgage.
  • Your savings are small, or you’ll spend them soon.
  • You’re a basic-rate taxpayer whose savings interest stays under £1,000 a year, or your savings are in a Cash ISA.
  • You can get a savings rate higher than your mortgage rate. That’s rare, but it happens with some regular savers.

Offset vs overpaying your mortgage

Offsetting works a lot like overpaying: both save interest at your mortgage rate. The difference is access. Once you’ve overpaid, that money is usually gone unless your lender lets you take overpayments back out. Money in an offset account can still be withdrawn. And most fixed deals limit overpayments, often to 10% of the balance a year, so check your deal.

If you want the lowest rate and you’re sure you won’t need the money, overpaying a cheaper normal mortgage can come out ahead. If you want a safety net, the offset’s flexibility has real value.

Questions to ask a lender or broker

  • Can I withdraw from the offset account at any time, and is there a minimum balance?
  • Can family members link their savings too?
  • Do you keep my monthly payment the same, or can I choose to lower it?
  • Is there a limit on how much I can hold in the offset account?
  • What happens to the offset when my deal ends?

Offset mortgage FAQ

Is an offset mortgage worth it in the UK?

It can be, if you have a decent savings pot you want to keep accessible and your savings interest would be taxed. If the offset rate is much higher than a normal deal, or your savings are small, a normal mortgage plus savings often costs less. Use the calculator with real quotes.

Do I pay tax on money in an offset account?

No. It doesn’t earn interest, so there’s nothing to tax. The benefit comes as lower mortgage interest.

Are offset mortgage rates higher?

Often a little, and fewer lenders offer them. That’s why it’s worth comparing an offset deal against the best normal deal, not just against your current mortgage.

Should I put my emergency fund in an offset account?

It’s one of the best uses for one, as long as your lender lets you withdraw quickly. Your safety net stays available but cuts your mortgage interest while you don’t need it. See my emergency fund guide.

More mortgage and savings tools

Summary: an offset mortgage turns your savings into tax-free interest savings at your mortgage rate, while keeping the money within reach. Whether that beats a cheaper normal mortgage depends on the rate gap, how much you have saved and your tax band, so run your own numbers above and check them with a broker before you decide.

More household planning help

Sources and assumptions

About the author: Dr Kalpana Govindaraasan, PhD scientist, former science teacher and mum behind MoneySavvyUK. I’m not a financial adviser or mortgage broker; this is general information.