ISA to Offset mortgage?

dmarks

Hi
I have about 5k in an ISA now earning 1.5%. Is it worth transferring it to my First Direct Offset mortgage and offsetting it as it seems like it will earn more for me there.

Thanks

tcall

I have the same quandry... Of course, in a few days time its not even gonna be earning 1.5%...

gil13

I am guessing that your mortage rate is a lot higher that your ISA return so it would make sense to pay what you were paying into the ISA (regularly?) into offset linked account. You could leave what is in the ISA there for the tax free benefits longer term or there could be an argument as it is only 5K to taking it all out and offsetting with it, a choice you need to make. For us, we fixed our ISAs for a year at 6.3% but when they finish will probably leave the ISA cash there and put any monthly or extra savings into the offset, one of the reasons I like the flexibility of the offset arrangement. I think FD are missing a trick really when it comes to ISA's, I have told them so, maybe if enough of us do then they might consider allowing ISAs to be linked as offsets (like IF and I think possibly woolwich). If they said we would accept transfer in of existing ISA's to offset mortgage account holders then we would certainly consider doing so. Would be another plus point for the account and would allow the bank themselves to get deposit monies in.

dmarks

Thanks for the replies. I don't pay anything in monthly as don't have enough over each month! We haven't got a fixed ISA so are losing out as far as I can see but wanted to know if it was the right thing to do to move the cash!

Thanks

gil13

It depends on whether you want the benefit of the tax-free shelter for the 5K and any compound interest for life, or the benefit of a reduced monthly payment or reduction of term (of mortgage). I would probably be tempted to go for the offset option and look to rebuild the ISA savings when rates have improved and when in a better position to do so.

lisyloo

I would look to get most competitive ISA and mortgage rates.
I'm currently paying 1.99% mortgage and 4.56% ISA.

Personally I don't think it's worth losing the (currently) lifetime allowance which is highly valuable.
Even if you cannot get good deals, this current situation MAY be short term.
Traditionally it has been possible get higher ISA than mortgage rates (and still is) if you qualify.
I realise not everyone will qualify for the best deals, but I think you need to consider it carefully as this allowance is very valuable.
Governemtn policy can change but I don't see it being removed and certainly not retrospectively.