ISA Savings Vs Offset Mortgage Savings

nathanhill69

I currently have a fixed rate offset mortgage at 5.29% with 4 1/2 years left on the term. Given the current state of interest rates would it make more sense to take any ISA savings I have which are paying under 5.29% and put them in the linked-to-mortgage offset saving account.

I Understand I'll loose the ISA tax free status on these saving HOWEVER as the interest saved on the offset mortgage is also effectively tax free then I can't see a problem. Also, not planning to keep these saving forever - suspect I'll chip into them gradually over the years so the ISA's aren't a nest egg.

maninthestreet

If you are paying more interest on the mortgage than any ISA account pays, then it would make sense to move some or all of the money in the ISA to the linked-to-mortgage savings account.

Gambler

nathanhill69 wrote: »

I currently have a fixed rate offset mortgage at 5.29% with 4 1/2 years left on the term. Given the current state of interest rates would it make more sense to take any ISA savings I have which are paying under 5.29% and put them in the linked-to-mortgage offset saving account.

I Understand I'll loose the ISA tax free status on these saving HOWEVER as the interest saved on the offset mortgage is also effectively tax free then I can't see a problem. Also, not planning to keep these saving forever - suspect I'll chip into them gradually over the years so the ISA's aren't a nest egg.

I'm in exactly the same boat. I'm guessing you took out the FD 5 year fix too. I've calculated that I will be £900 worse off next tax year if I don't close my ISA and move to the offset.

I'd rather not lose the tax shelter but £900 is not to be sniffed at. Why oh why do FD not allow you to link ISA's. I didn't realise this until recently :mad:

nathanhill69

Gambler wrote: »

I'm in exactly the same boat. I'm guessing you took out the FD 5 year fix too. I've calculated that I will be £900 worse off next tax year if I don't close my ISA and move to the offset.

I'd rather not lose the tax shelter but £900 is not to be sniffed at. Why oh why do FD not allow you to link ISA's. I didn't realise this until recently :mad:

That's the mortgage, basically I've just checked the interest on the particular ISA account I was talking about and found out it was paying 1.8% - I've closed it down and transferred balance to my linked savings account where it can work harder for me.

spcdust

Cash-Is-King

I'm in the same boat too, 5.29% FD with 4.5yrs to go - but don't feel like a mug; there was a Finacial Advisor/Economist giving out great advice on Jeremy Vines R2 show and he was giving out sound advice to people looking to save, which mortgage to get etc etc - At the end he admitted he had gone for a deal similar to ours as the general trend was mortgages where going up so fix to stop this going up. Let's weather the storm and keep our chins up!!

I read the following article the other day:

http://www.guardian.co.uk/money/2009/jan/11/savings-money-isas

This quote gave me a bit of hope as I am sick of hearing of the rates I could have been on if I got a Tracker....

"Hagger says it is still worth keeping an emergency savings pot for your cash, ideally up to three months' salary, but any sum you can spare will be a start.Offset mortgage customers - where your savings offset your home loan but earn no interest - are in a particularly strong position, Hagger adds, since they'll effectively be getting the mortgage rate (hopefully around 5-6%) as a de facto savings rate."
Good luck!

Gambler

Cash-Is-King wrote: »

I'm in the same boat too, 5.29% FD with 4.5yrs to go - but don't feel like a mug; there was a Finacial Advisor/Economist giving out great advice on Jeremy Vines R2 show and he was giving out sound advice to people looking to save, which mortgage to get etc etc - At the end he admitted he had gone for a deal similar to ours as the general trend was mortgages where going up so fix to stop this going up. Let's weather the storm and keep our chins up!!

I read the following article the other day:

http://www.guardian.co.uk/money/2009/jan/11/savings-money-isas

This quote gave me a bit of hope as I am sick of hearing of the rates I could have been on if I got a Tracker....

"Hagger says it is still worth keeping an emergency savings pot for your cash, ideally up to three months' salary, but any sum you can spare will be a start.Offset mortgage customers - where your savings offset your home loan but earn no interest - are in a particularly strong position, Hagger adds, since they'll effectively be getting the mortgage rate (hopefully around 5-6%) as a de facto savings rate."
Good luck!

I also read that article but it's still not helping to answer my question of whether to close the cash ISA and move to offset

Cash-Is-King

Suppose it depends how many years you have built up in the ISA. Ihave only 1.5 years so come April, I will be whacking mine in. It stacks up in my case.

feisty1

Gambler wrote: »

I didn't realise this until recently :mad:

This is what happens when people dont take advice

TighterThanTwoCoatsOfPain

I did exactly the same recently... I only had 2.5 years worth of ISA contributions behind me and they werent "forever" savings so not worried about losing the tax free wrapper...

feisty1 wrote: »

This is what happens when people dont take advice

Well maybe yeah, but FD dont hide that fact.. I read that in the blurb before i signed up.

Ed_Zep

feisty1 wrote: »

This is what happens when people dont take advice

"You qualified to give advice?" :rolleyes:

feisty1

[quote=Ed_Zep;17764669]"You qualified to give advice?" :rolleyes:[/quote]

Yes I am authorised to give advice...............