The reason I enjoy this site, is the questions make you think, as well as learn from others. I had never heard of mortgage offset accounts-but did a little research, because I didn't think there was much "new" in the mortgage world after the recent breakdown of the mortgage industry.

My understanding is that this is mainly offered by UK banks, as a way for folks with large savings, as well as a mortgage to avoid paying taxes on the interest from their savings. The interest that accrues in the savings goes toward the interest on the mortgage-making that savings interest not count as income. The savings account balances also goes against (offsets) the total of the mortgage-so you may qualify for more house than you would without an "offset account".

It does appear you can use or have access to your savings-at least in UK banks, and they recalculate the interest costs as your balance changes.

I did find a reference suggesting these type mortgages are starting to be offered in the US-I would love to know which bank offered you the product.

A few US companies (Washington Mutual, Wells Fargo) previously offered an offset account. See this Fatwallet Finance archived discussion on mortgage offset accounts. The thread also describes a way to simulate an offset account, by depositing your paycheck into a HELOC.