Find your hidden flex appeal

Tired of your rigid mortgage? The small print may allow some room for manoeuvre

Current account or "offset" mortgages - where buyers link their cash accounts to their home loans - have been available in the UK for less than a decade. But they are one of the fastest-growing parts of the market.

Datamonitor reports that around 15 per cent of home owners already have an offset or current account mortgage. The financial services industry expects this to climb to 20 per cent by 2010

But there can be a degree of flexibility in a standard mortgage, too. It might just be a question of making it work harder. Here is what to look for in the small print.

ARE OVERPAYMENTS OK?

Offset mortgages enable borrowers to make overpayments, so they can pay off the loan more quickly. But if you have had your mortgage for five years or less, it is likely that the lender will allow some overpayments, even on fixed or discounted loans.

Abbey, for example, allows overpayments of up to 10 per cent in a calendar year on many of its mortgages. The Nationwide allows overpayments of £500 a month, irrespective of mortgage size.

Mark Chilton, of brokers Purely Mortgages, says it is important to tell the lender that it is a repayment of capital, not an advanced payment of interest, so it is credited in the right way.

CAN I BORROW MORE MONEY IN THE FUTURE?

Most lenders will offer a further advance, as long as it meets their rules for affordability. They are often charged at the (expensive) standard variable rate (SVR), but this can still be cheaper than remortgaging. A smarter way to allow for future borrowing, though, is to ask for a larger mortgage than you need, and then pay it back straight away. This overpayment can then be borrowed back in the future; the best lenders will grant this borrowing on their main mortgage rate, not on the SVR. To take full advantage of this, though, does need a mortgage with an unlimited overpayment facility.

CAN I REDUCE OR STOP MY PAYMENTS?

Offset mortgages offer payment holidays, but so do many regular loans. But usually you can only take a payment holiday if you have already built up overpayments. Two options are to switch to an interest-only mortgage or to lengthen the term. Lenders will often agree to this but it is expensive in the long term as it will take longer to clear the loan, says James Cotton of brokers London & Country. "You can change the term by tweaking the monthly payments. But as most lenders charge £50 or £100 it is not something you would want to do regularly."

SO WHAT'S THE POINT OF A FULLY FLEXIBLE OR AN OFFSET MORTGAGE?

Fully flexible and offset mortgages fulfil slightly different roles. The former is not tied to a savings or current account, so it is simpler to set up but still allows payment holidays, overpayments and advances.

But the interest rates on such mortgages remain above those for standard mortgages and higher than the best offset deals. If it is just a question of making overpayments, a standard mortgage might be flexible enough.

Where offset mortgages really start to make sense is for a home buyer with significant cash savings. Anyone who has between 15 and 20 per cent of their mortgage amount in cash could benefit from an offset mortgage, because instead of earning a (low) savings rate of interest on that balance, their monthly mortgage interest is reduced.

Higher-rate tax payers benefit most of all, because there is no tax to pay on the interest that is offset. A higher-rate tax payer saving 4.5 per cent on mortgage interest would have to earn 7.5 per cent in a standard savings account to be as well off.

But offset mortgages - especially those linked to current accounts - need discipline to work well. "A cheque book or debit card linked to a mortgage can be very dangerous," says Mark Chilton at Purely Mortgages. "You have to use them intelligently and not fall prey to the temptation to spend."