Investing using Woolwich Current Account Reserve

Frugall

I have a Barclays/Woolwich Tracker Offset Mortgage with an interest rate 0.75% above BoE base rate. Included with this mortgage is a Current Account Reserve facility which is basically a secured overdraft charging the same interest rate as the main mortgage. Can anyone think of any reason why I shouldn't use money from this facility (could be up to £90k) to invest into a 1 year Nationwide Tracker bond which pays interest at 2% above BoE base rate? They are both tracker rates so whatever happens to the base rate the differential between the interest rates will be maintained. I can't think of any problem with this idea but perhaps there is someone more imaginative out there!

Thanks for your advice!

Anon

Remember that on savings (unless an ISA) you have to pay tax, therefore the 2% above base at the moment is 3% gross interest (or 2.4% after tax for a basic rate tax payer/1.8% for high rate tax payer - unless I have the sums wrong!) - still a potential profit, but not as much as you are possibly calculating. Plus, does the bond pay interest monthly or at the end of the term? (if the latter, you are having to pay all the interest on the loan each month and having to cover that from income, until the interest is paid to you).

Someone else will be able to provide better calculations.

Anon

getmore4less

You will need to find a payment for the mortgage assuming the bond pays out at the end.

If you have offset funds this should not be a problem.

the size of the paymnet will depend onthe mortgage schedule(repayment/interest only - reduce term/payment.)

Don't forget the tax.

Start with the barclays regular saver £250pm @ 6%.