Savings from offset mortgages beat cash ISAs

A study by first direct shows that over the last ten years typical cash ISA savers, who also hold a mortgage, would have been better off by placing their savings pot in a mortgage offset account.

Based on average cash ISA rates and average mortgage rates over the last ten years, if savers had tucked away their maximum cash ISA allowance into an offset account instead of a cash ISA, they would have been better off by £3,306.

The analysis shows that saving the maximum amount into cash ISAs since April 6th 2000 would now be worth £38,328.  In contrast, someone placing the same sum into an offset mortgage would have saved £31,200, plus knocked an additional £10,434 off their mortgage, making a total saving of £41,634.

Richard Tolchard, senior mortgage product manager at first direct, commented: "For people without a mortgage or possibly nearing the end of their mortgage, cash ISAs are often the most efficient way to save cash. However for savers who hold a mortgage, this analysis show that cash savings work harder offsetting against a mortgage than they do within a tax efficient ISA."