Current account and offset mortgage lending has gone up from £4.2 billion in 2000 to £29.2 billion last year, a Datamonitor report shows.
These mortgages now make up ten per cent of the mortgage market, compared to four per cent at the beginning of the millennium.
Datamonitor predicts that current account mortgages and offset mortgages will outperform traditional mortgages before the end of the decade. It is estimated that these mortgages will make up 30 per cent of all mortgage lending by 2009, with a market share values at £84.7 billion.
Offset mortgages have shown the fastest growth rate, with average growth of 77.2 per cent a year. This was more than twice the yearly growth rate of current account mortgages .
Customers with offset mortgages pay interest on the difference between their savings and borrowings, which are kept in separate accounts .
Current account mortgages combine the mortgage holder's current and savings accounts and charge interest only on the mortgage amount.
"Customers clearly like the flexibility of offset mortgages to save on the amount of interest paid and potentially pay off their mortgage earlier," commented Gary Lacey, group product manager at Norwich and Peterborough Building Society, to the Eastern Daily Press.
Mr Lacey added that since the mortgage lender launched its offset mortgage product in February last year, it has become one of the most popular products on offer.
Offset mortgage lending on the up
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