Clydesdale Bank withdraws offset mortgages for new customers
Why you should act now to grab a tax-efficient mortgage
One of the UK’s largest mortgage companies has become the latest lender to pull its offset mortgages.
Clydesdale Bank, which is part of Virgin Money, withdrew all its offset rates for new customers on the 2nd October. Family Building Society stopped offering offset mortgages in March, following First Direct in 2023. Scottish Widows Bank, which was known for offset deals, also stopped all new lending later that year.
Which lenders still offer offset mortgages?
This change means that new offset mortgages are now offered by just a few banks and building societies, including Barclays for Intermediaries, Handelsbanken, Coventry Building Society, and Accord Mortgages, as well as the private bank Coutts for loans of £1 million or more.
Why are offset mortgages beneficial?
Offset mortgages are tax-efficient because any loan interest you save by offsetting your savings is tax-free. You can pay less interest while still maintaining access to your savings, unlike when you make overpayments, which are normally capped at 10% of the outstanding balance.
Offsets are still popular among the self-employed or those with irregular earnings, who can use the accounts to set aside large chunks of money for tax bills or those who earn annual bonuses, which they can put away.
Why are offset mortgages being withdrawn?
New capital lending rules have played a part, making offsets less profitable for banks, but largely due to the drop in interest rates after the crisis — if rates are at rock bottom, you are not saving much by offsetting your savings. Lenders also often struggle to allocate cash to borrowers making larger withdrawals from their offset mortgages.
Aaron Strutt, product director at Trinity Financial, says: "Clydesdale have been offering offset mortgages for years, particularly when they were owned by National Australia Bank, and they have been popular with many of our clients.
"The mortgage market constantly changes and this is just another example of how the market moves. If you want an offset mortgage, there are rates to choose from, but please note that they may not be available in a few years."
Virgin Money told George Nixon at The Times: “We regularly review our mortgage range and as a result of that review we have made the decision to withdraw offset mortgages to new customers.”
Call Trinity Financial on 020 7016 0790 to secure an offset mortgage or book a consultation
The information contained within was correct at the time of publication but is subject to change
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