NatWest's new balancing act

NatWest has become the first high street bank to offer small business customers the chance to offset their current account against a personal mortgage.

In the same week that the Department of Trade & Industry announced there are now three million Britons operating either as a sole trader, or in a partnership, NatWest has launched its Offset Banking Service.

You have to hold a business current account and take out an offset flexible mortgage.

Instead of receiving interest on the current account, the balance is "offset" against the business owner's personal home mortgage.

NatWest claims that on a £100,000 mortgage, you can save £6,000. With an average business current account balance of £3,200, for the duration of the mortgage, savings would be almost £21,000.

It also estimates they would be able to repay the mortgage around three years earlier than somebody with the same mortgage without business offsetting.

The mortgage is a variable rate product - currently at 5.65% with a 1% discount for the first three months. Customers can make lump sum reductions and overpayments without charge, and can also request to underpay and take payment holidays.

All accounts held within the scheme remain separate, so customers use them independently of each other. Account numbers, standing orders and direct debits all remain the same and customers still receive separate statements as usual.

Benny Higgins, chief executive of NatWest retail banking, said: "Our service is based around building strong relationships and providing our customers with innovative products and services that will best help them prosper.

"The obvious savings, both in terms of money and time, simply by letting customers' separate personal and business accounts 'talk' to each other, will be significant."

Just how attractive the deal is, will depend on how much money moves through your current account and how much alternative income you are able to generate from it.

Last month several IFAs questioned whether standard offset mortgages offered good value for money to non-business current accounts.

The consensus was that they only made sense if your current account was constantly fluctuating, or that you received large sums, and then nothing for a while - the exact conditions that many small businessmen and woman will find themselves in.

A spokesman for NatWest says all accounts have to be in the same names, which means that partners in a business can only sign up for the scheme if they live together - partners with different domestic arrangement will not be eligible. There are no redemption penalties.

For more information, customers can call free on 0800 068 0563 or contact their local NatWest branch.