A current account mortgage combines your current account balance with your mortgage account balance, although the actual accounts normally remain separate.

Your current account functions as a 'normal' current account but any credit in your current account is offset against your mortgage. For example, if you have £600 in your current account and an outstanding mortgage balance of £93,000, your mortgage repayments will be based on the offset balance of £92,400.

Since current account interest rates are lower than mortgage rates, you save money. Even if you only have a few hundred pounds on average in your current account, you can end up saving hundreds of pounds on interest payments over the term of the loan.

Some current account mortgages go further and allow you to incorporate other debts such as a loan and credit card. This means your loan and credit card debts are repayed at the same interest rate as your mortgage, which for many people will be a reduction in monthly repayments of over 50%. Intelligent Finance is a perfect example. Their site also offers an excellent explaination of how this form of banking works.

As with a regular mortgage, a current account mortgage will require you to secure the loan against your property and you will normally be required to pay your salary into your current account each month.

The credit limit that you will be offered will be based on a number of factors including the equity in your home and the size of your salary. It is likely that this credit limit will be reviewed on a regular basis.Click here for more details about flexible mortgages.