Offset mortgages are a slightly different slight on a normal current account mortgage. As with a current account mortgage, an offset mortgage sees your salary paid in monthly, permits overpayment, underpayment, lump sum deposits, payment holidays and all the other features of a flexible mortgage, as well as giving you a cheque book, debit card and the facility to set up direct debits.

So what exactly is the difference?

Instead of lumping all the accounts (current account, mortgage and savings) into one and having a single balance, the different components are still kept separate from the customer's point of view.

The most obvious difference from the customer's point of view is that you are not presented with an account balance that is tens of thousands of pounds overdrawn each time you go to a cashpoint, and some people find that it is less daunting and easier to manage their affairs when they have the perception that the money is in different accounts.

Despite being held separately, the current account and savings accounts still work towards reducing the mortgage debt. However, unlike a current account mortgage, the three different accounts are not usually charged at the same rate of interest.

Some lenders charge a set rate of interest on the current account and the savings account, while others will 'sweep' the marketplace and apply the best rate of interest that can be found for each particular component. The balance in the two accounts is then added together and the total is then offset against the mortgage.

This essential means that interest is then calculated on the mortgage debt minus the balance in the other two accounts, in much the same way as a normal current account mortgage. Since it is not normally possible to find savings or current accounts that pay a rate of interest as high as the Standard Variable Rate on a mortgage, the differing interest rates is likely to represent a weakness in this type of loan in comparison to an all-in-one current account.