Mortgage holders with £100,000 in savings could be over £40,000 better off if they offset those savings rather than deposit them in an instant access savings account, according to a study by first direct.

The research also highlights that, in the current climate, whatever the amount being saved the saver is always better off offsetting it against their mortgage rather than putting it in an instant access savings account.

By offsetting savings against a mortgage, there is less interest to pay on the mortgage as well as having the flexibility of instant access to the money. As mortgage rates over the longer term tend to be higher than savings rates, the homeowners’ savings work harder for them.

First direct says the typical offsetter now has savings equivalent to 20% of their mortgage borrowing. So a homeowner switching to a first direct Offset Tracker mortgage, tracking 2.09% above the Bank of England Base Rate (currently 2.59%) for the life of the loan, could cut down the length of a £150,000 mortgage by close to three years (33 months), and save £18,342 in interest payments over its lifetime.

Richard Tolchard, senior mortgage product manager at first direct, said: “It’s amazing the amount of money people can save if they offset their savings balances against their mortgage. The fact that they still benefit from having ready access to their cash if they need it is a real bonus.”””