Current account mortgages are similar to an offset mortgage.
The difference is that your current account, rather than your savings and mortgage, are merged into one.
For example, if you have a current account mortgage of £150,000 and £1,500 in your current account, your statement will show that you owe your lender £148,500.
For example, imagine your take home pay is £3,000 a month, and have a mortgage of £148,000.
While your £3,000 is in the account, you’ll only be charged interest on £145,000.
As you go through the month and spend some of your pay, your mortgage balance gradually rises and the daily interest charges will increase.
When you get your next pay packet into your bank account, your mortgage balance will once again be slightly reduced and the interest being charged will fall.
So with a current account mortgage, the interest charged fluctuates in line with the rise and fall of the amount in your current account.
If you have a repayment mortgage you’ll pay off more capital whenever your current account is in credit.