Offset mortgage or savings?

[Roberta1]

I've been trying to get my head round this one so thought I would ask here!

We have savings, currently earning about 6% (I am a non tax payer). We also have a mortgage, about 90k, on an interest rate of 5.81% fixed for two years. This mortgage has an offset facility (no interest) which I haven't used until now.

Am I right in saying that as my savings interest rate is higher than my mortgage interest rate, I should leave my savings where they are rather than offset them against my mortgage?

I'd appreciate your views.
Roberta

[Lokolo]

That is correct. However soon enough when rates drop (tomorrow is decision day for base rates!!) you may find your savings also drop.

Which then leads a question what to do then.

Obviously it depends on yourself, some like to pay extra off on mortgage and have no savings - however, as a non tax payer - how do you have income to pay mortgage off? I am thinking OH? If so, what happens if they get redunditated? (new cool word), the Savings would be nice to lean up against if the worst comes.

[Roberta1]

Originally Posted by Lokolo

That is correct. However soon enough when rates drop (tomorrow is decision day for base rates!!) you may find your savings also drop.

Which then leads a question what to do then.

Obviously it depends on yourself, some like to pay extra off on mortgage and have no savings - however, as a non tax payer - how do you have income to pay mortgage off? I am thinking OH? If so, what happens if they get redunditated? (new cool word), the Savings would be nice to lean up against if the worst comes.

I do earn, just not enough to pay tax, so OH provides most of the income. I believe if the money is offset against the mortgage I can withdraw it if I need it.
I will see what happens with the interest rates tomorrow

[sloughflint]

Try fixing anything you don't need for more than 6%?

Your logic is sound. As long as net savings are greater than your mortgage rate, then no need to put in the offset account.

And yes, if you do offset in the future, think of it as easy access status.

[Lokolo]

Yeh I ignored the offset bit, had no idea what it meant