IIB HAS launched what it describes as a unique addition to the so-called offset mortgage market which will allow customers to reclaim capital and interest overpayments on their home loans.

The bank said the product would allow homeowners to minimise interest payments over the life of their mortgages in a similar way to offset mortgages offered by rival lenders.

But, in addition, IIB's new Saver Mortgage would allow customers to withdraw interest and capital payments made over their regular minimum monthly repayments, free of charge.

Offset mortgages have typically meant credit balances in homeowners' deposit or savings accounts being offset against the amount left owing on their mortgage when minimum monthly interest payments are calculated.

However, IIB said its Saver Mortgage customers would be able to use the same system without having to set up a separate savings or deposit account.

A charge dependent on the bank's "cost of funds" will be levied where overpayments exceeded 10 per cent of the value of the mortgage, while Saver Mortgage customers will pay the same rate as levied for its other fixed rate and tracker mortgages.

In a credit opinion issued yesterday, ratings agency Moody's said IIB was a niche operator with "a fragmented franchise" and it relied heavily on interbank and corporate funding. However, it said it was adequately profitable, had low costs and sound asset quality.