Offset Mortgage Calculator

Calculate interest saved by offsetting savings against your mortgage. See equivalent tax-free rate.

Last updated: April 2026 · Source: FCA — Mortgages overview

£
£

Interest Saved by Offsetting

£50,024.92

£166.75/month saving · Equivalent to 6.7% tax-free savings rate

Normal Monthly

£1,389.58

Offset Monthly

£1,222.83

Disclaimer

This calculator is provided for informational purposes only and should not be considered as financial or tax advice. All calculations are performed locally in your browser — no personal data is collected or sent to our servers. Rates and thresholds are sourced from HMRC and GOV.UK and are updated for the current tax year. Always verify results with HMRC or consult a qualified professional before making financial decisions.

How It Works

An offset mortgage links your savings account to your mortgage. The savings balance is offset against the mortgage balance, so you only pay interest on the difference. For example, with a £200,000 mortgage and £30,000 in savings, you pay interest on £170,000. The savings do not earn interest, but the tax-free mortgage interest saving is equivalent to earning interest on savings.

For higher-rate taxpayers, offsetting is particularly beneficial because the equivalent gross savings rate would need to be much higher to match. If your mortgage rate is 4.5%, a 40% taxpayer would need a savings account paying 7.5% gross (4.5% ÷ 0.60) to match the offset benefit.

This calculator compares a standard mortgage with an offset mortgage. Enter your mortgage details and savings balance to see the interest saved each year, the reduction in mortgage term and the equivalent gross savings rate you would need to beat the offset benefit at your tax rate.

Example: £250,000 mortgage at 4.5%, £40,000 savings

  1. Standard interest: £250,000 × 4.5% = £11,250/year
  2. Offset interest: £210,000 × 4.5% = £9,450/year
  3. Annual saving: £1,800
  4. Equivalent gross rate (40% taxpayer): 4.5% ÷ 0.60 = 7.5%
  5. Term reduction: approx. 4 years 6 months on a 25-year term

Source: FCA — Mortgages overview

Frequently Asked Questions

What does the Offset Mortgage Calculator do?
Calculate interest saved by offsetting savings against your mortgage. See equivalent tax-free rate. All calculations are performed in your browser using official UK rates and thresholds.
Is this based on current interest rates?
You can enter any interest rate to model different scenarios. Check the Bank of England base rate and current mortgage deals from lenders for the latest rates.
Should I get professional advice?
This calculator provides estimates for guidance only. For a formal mortgage offer, speak to a mortgage broker or lender who can assess your full circumstances and provide personalised advice.