Stock market or pay mortgage?

rl290

Hi all, I'd like to hear your views on my dilemma before I make a firm decision. Any comments are much appreciated! The topic spans the savings, ISAs and mortgage boards, but at the heart of the issue are views on stock market perfomance, so I thought this would be the most suitable board.

I have c.£10k in a cash ISA which, even if I were to move it to the highest-paying ISA account, would still generate a poorer interest rate than my mortgage (c.£200k, 5.33%, fixed until 2012). I am of the opinion that this situation will not change for some time: I imagine that lenders will be under more pressure to lower mortgage rates than to raise savings rates for the forseeable future. Therefore, it seems logical to overpay the mortgage now with the ISA money (I am allowed to overpay 10% each year without penalty).

The other option I see is to move the cash ISA money into my stocks and shares ISA and drip-feed it into the market over the coming year, or so. I would most likely spread this between UK equity income, absolute return and US funds, with some limitted exposure to Japan and the emerging markets. While this is clearly more risky, I can leave it there for the long haul.

For the record, I have enough 'other' cash in savings accounts to keep me financially stable, but require this money to remain at arms reach as I currently have very unconventional income/spending paterns! (Long story). Anyway, I don't need to worry about losing the availability of the cash ISA money.

Thanks in advanc for any views,
RL290