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As Coventry cuts offset rates by up to 53bps, "2025 could be the year of the offset mortgage"

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ended 27. September 2024

While Scottish Widows has left the offset market for new business, this morning brokers welcomed the fact that Coventry reduced their Offset, Interest-only and Offset Interest-only products by up to 53bps, as they say demand for these mortgage is growing.

One broker, Ben Perks, Managing Director at Orchard Financial Advisers, said: "The first lender to bring out a competitive offset mortgage product will make a killing because so many people are crying out for them. At the moment, Coventry are dominating the space and are almost without challenge. Today they make a ballsy move by improving their offering as Scottish Widows back out. As interest rates are higher, even a modest amount of savings make a significant difference over the life of a mortgage. Offset mortgages don't just help the affluent: small savers and those with parents willing to help without losing access to funds can benefit, too. The limited number of lenders offering offset must mean the profit margins are tight, but surely the influx of applications could make up for this?"

Jack Tutton, Director at SJ Mortgages, also said more borrowers are asking for offset mortgages: "We have seen an uplift in the amount of enquiries from clients asking about offset mortgages. With the base rate falling in August and talk of further reductions in the near future, people are looking at alternative ways to maximise their savings. With Scottish Widows previously being such a significant offset lender, their withdrawal from new mortgage business leaves a huge gap in the market. This presents a great opportunity for a lender as this gap does need to be filled, with only a small handful of lenders currently offering this type of mortgage. An offset mortgage is a great facility for mortgage holders with savings in the background, but the lack of lenders offering competitive offset rates means people are not utilising these and are opting for traditional mortgage products over offset ones."

Michelle Lawson, Director at Lawson Financial, also welcomed the cuts from Coventry: "It's great to see Coventry reducing their offset rates considerably today. 2025 could be the year of the offset mortgage. There is a real gap in the product market for good, solid and competitive offset mortgages. Coventry and Accord have limited offset options, whereas Barclays do offer the full offset with bank accounts and ISAs but a significant interest rate premium is charged for this. While lenders are reviewing propositions for 2025, offset should be on the agenda. Consumers want it, so give them what they want."

Daniel Hobbs, Managing Director at New Leaf Distribution, says the Coventry may just have switched the offset lights back on: “Unfortunately, this great product has been further marginalised by another lender withdrawing, a result of years of tight affordability checks and the push towards fixed rate mortgages being the norm. However there is light at the end of the tunnel and bravo to the Coventry for reducing rates substantially across their offset range. Maybe it’s not yet all over for offset. These changes may just have switched the offset lights back on.”

David Stirling, Independent Financial Advisor at Mint Mortgages & Protection, said that Coventry are trying to corner this niche market: “With Coventry reducing their rates on their offset products this morning, they appear to be trying to corner this niche market. Scottish Widows withdrawing earlier in the week has left a restricted number of lenders, including Coventry and Accord. With innovation in mortgage products needed in the future, other lenders such as April Mortgages and Perenna, who offer long-term fixes with flexible terms, are going to start eating into the market share of the established big name banks.”

The views of 12 brokers are below.

12 responses from the Newspage community

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Michelle Lawson
Director at Lawson Financial
It's great to see Coventry reducing their offset rates considerably today. 2025 could be the year of the offset mortgage. There is a real gap in the product market for good, solid and competitive offset mortgages. Coventry and Accord have limited offset options, whereas Barclays do offer the full offset with bank accounts and ISAs but a significant interest rate premium is charged for this. While lenders are reviewing propositions for 2025, offset should be on the agenda. Consumers want it, so give them what they want.
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Ben Perks
Managing Director at Orchard Financial Advisers
The first lender to bring out a competitive offset mortgage product will make a killing because so many people are crying out for them. At the moment, Coventry are dominating the space and are almost without challenge. Today they make a ballsy move by improving their offering as Scottish Widows back out. As interest rates are higher, even a modest amount of savings make a significant difference over the life of a mortgage. Offset mortgages don't just help the affluent: small savers and those with parents willing to help without losing access to funds can benefit, too. The limited number of lenders offering offset must mean the profit margins are tight, but surely the influx of applications could make up for this?
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Daniel Hobbs
Managing Director at New Leaf Distribution
Unfortunately, this great product has been further marginalised by another lender withdrawing, a result of years of tight affordability checks and the push towards fixed rate mortgages being the norm. However there is light at the end of the tunnel and bravo to the Coventry for reducing rates substantially across their offset range. Maybe it’s not yet all over for offset. These changes may just have switched the offset lights back on.
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Hannah Bashford
Director at Model Financial Solutions
Offset rates can often be regarded as complicated and often disregarded. With the rate cuts from Coventry they are now back on the agenda and for the right client they could be their perfect match.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Offset mortgages are a great niche product for the right borrowers, with Scottish Widows leaving that sector there is a serious lack of options. With savings account rates increasing and mortgage rates coming down, it may be the market for these hasn’t been large enough for the undoubted higher admin and management costs of these account types.
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Jack Tutton
Director at SJ Mortgages
We have seen an uplift in the amount of enquiries from clients asking about offset mortgages. With the base rate falling in August and talk of further reductions in the near future, people are looking at alternative ways to maximise their savings. With Scottish Widows previously being such a significant offset lender, their withdrawal from new mortgage business leaves a huge gap in the market. This presents a great opportunity for a lender as this gap does need to be filled, with only a small handful of lenders currently offering this type of mortgage. An offset mortgage is a great facility for mortgage holders with savings in the background, but the lack of lenders offering competitive offset rates means people are not utilising these and are opting for traditional mortgage products over offset ones.
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Aaron Strutt
Product and Communications Director at Trinity Financial
Since Scottish Widows exited the offset mortgage market, smaller lenders have been able to attract more business. It would be nice to have more offset options for borrowers but ultimately they are still a pretty niche product.

We get a lot of requests for offset mortgages, and while they are popular with some borrowers, they are ultimately only worth taking if people put funds in the linked accounts. The available offset mortgage rates are usually more expensive than the standard mortgage deals.

Borrowers use offsets for various reasons, including keeping cash for a rainy day, savings for school fees and funds for building work. Offsetting for tax purposes is also popular, especially for high-net-worth clients with chunky tax bills to pay as they can use lump sums to reduce the interest they pay on their mortgage until they have to pay HMRC.
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David Stirling
Independent Financial Advisor at Mint Wealth
With Coventry reducing their rates on their offset products this morning, they appear to be trying to corner this niche market. Scottish Widows withdrawing earlier in the week has left a restricted number of lenders, including Coventry and Accord. With innovation in mortgage products needed in the future, other lenders such as April Mortgages and Perenna, who offer long-term fixes with flexible terms, are going to start eating into the market share of the established big name banks.
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Darryl Dhoffer
Founder at The Mortgage Geezer
In the arena of mortgage gladiators, where interest rates are on a downward trajectory, the offset mortgage could stand tall as a formidable warrior, ready to face the challenges of a decreasing interest rate environment. As interest rates fall, offset mortgages become even more potent. The savings you've accumulated are now earning less interest in your savings account. By offsetting these savings against your mortgage, you're essentially forcing your savings to work harder, accelerating your loan repayment and reducing the overall interest you pay. Its flexibility, acceleration, protection, and strategic advantages could make it a worthy contender for the title of the ultimate warrior.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Offset Mortgages, for the right client, are an excellent product and could end up saving thousands in mortgage interest. The advantages have become more apparent over the past few years following the hike in interest rates. More lenders need to join or rejoin this market and the concept could benefit from a PR makeover.
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Craig Fish
Director at Lodestone Mortgages
Savings are at an all time high, yet rates are falling fast. Offset mortgages were once a popular product but sadly, over the years, lenders have withdrawn from the market. These reductions are great news for those with money in the bank and a mortgage and will appeal to many. This may be the renaissance of the offset.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Many of my clients are barristers and therefore self-employed as sole traders, they will often have cash set aside for VAT and income tax, so offset works brilliantly for them, but the number of good deals in this area has diminished and the exit of Scottish Widows is a big blow. Offsetting savings against your mortgage is an incredibly powerful financial tool that can wipe years off your mortgage term, and save you thousands of pounds in interest, when used correctly. There is certainly a gap in the market that lenders could look to exploit, even charging a modest premium on the interest rate. A range of offset fixed rates would be better still as most offset deals are only available as variable rate options, yet many borrowers would rather have the security of a fixed rate of interest.