The figures were based on taking out a £100,000 mortgage and current average saving and mortgage rates
If borrowers paid the minimum repayment on their loan and saved £300 a month in a separate savings account over the 25 year term they would actually be £42,909 worse off once they had paid off the loan.
In comparison if they had overpaid £300 a month on their mortgage they could pay it off 12 years early, saving £23,903 by paying back £123,084 rather than £146,998 over 25 years.
If they continue paying the same amount into savings for the remainder of the term they would have £17,762 more in savings than if they had saved £300 for 25 years, bringing the total up to being £41,665 better off.
Richard Tolchard, senior mortgage product manager at first direct, said: “The analysis shows that borrowers are often better off paying down their debt ahead of saving as historically the average rate of interest paid on a mortgage has been consistently higher than the average amount earned by saving.
“However that is not to say that we shouldn't save it is always advisable to have a sum set aside for a rainy day.
“An offset mortgage offers the best of both worlds, offering easy access to your savings while still helping you to reduce the overall interest you pay and ultimately the term of the loan.”
