How do all-in-one mortgages work?

Q Can you give me some information about all-in-one bank accounts and mortgages? I believe Virgin used to offer one some time ago and that the main advantage was that if you had your salary paid into the account, it was automatically credited against the interest outstanding on your mortgage. Is this correct?

MC

A You are right in thinking that Virgin used to do an all-in-one current account and mortgage and it's still around. But it is no longer on offer from Virgin and is now called the One Account. It has also just been named 'best current account and offset mortgage' by Moneyfacts (runners up were the Woolwich and Intelligent Finance).

You are also right about the way current-account - or 'offset' mortgages work. Any money in the current (and/or savings) account reduces the amount of the mortgage loan on which you pay interest. So if you agree a mortgage of ?100,000, for example, but have credit balances of ?5,000, you pay interest only on ?95,000.

Reducing the amount of interest you pay means that the mortgage can be paid off more quickly which ultimately saves money because you pay less interest overall. You can work out how much you might save by using the calculator at www.oneaccount.com.