Over the past two years UK offset mortgage borrowers have earned £1.4 billion more on their savings than those who placed their money in best buy savings accounts, according to first direct.

Following analysis of its customer data, first direct has claimed that the estimated total of 460,000 offset mortgage borrowers in the UK have made a total ‘return’ of £1.9 billion over the last two years, compared with only £534 million in cumulative net interest if they had alternatively invested in the equivalent best by saving accounts.

First direct says the average offset savings balance has risen by 19% (from £27,822 in Q2 2009 to £33,243 in Q2 2011) compared to a 2.5% rise in the average gross loan balance in the same period (from £127,058 to £130,186). This means the average offset saving balance is now 26% of the mortgage balance compared with 22% in Q2 2009 as offsetters seek to benefit from higher savings rates.

Over the last two years a 40% tax payer would have generated £2,960 more in savings with their first direct offset than if they hadd continually moved their money between best buy savings accounts.

With the prospect of rising interest rates in the next 12 months looking increasingly doubtful, first direct predicts the average offset borrower will continue to earn more in savings interest than in best buy savings accounts.

Richard Tolchard, senior mortgage product manager at first direct, said: “An offset mortgage is an excellent option for those borrowers looking to benefit from a higher rate for their savings. While many UK savers are currently seeing the value of their savings eaten up by inflation as well as being taxed on the interest earned on these savings