Spotlight: First Direct Lifetime Tracker

Offset mortgages have never been mainstream products here in Britain because traditionally you've had to pay a premium. However, this is no longer the case and First Direct's new deal is worth considering. It is offering a lifetime offset tracker with a market-leading rate of 2.58 per cent – 2.08 percentage points above the Bank of England base rate. The arrangement fee is average at £999. However, the minimum deposit is 35 per cent.

While the rate is variable, there is no early redemption charge so you can remortgage at any time.

How do offsets work?

Any savings you have can be held in an account that is linked to the mortgage. Rather than earning interest on your savings, you pay less interest on your mortgage. For example, if you have a £100,000 mortgage and £25,000 in savings, you would only pay interest on £75,000 but your payments are based on a loan of £100,000. This means you overpay each month and can clear your mortgage more quickly.