Borrowing to invest

brianc13

Hi New poster here so any idea's would be appreciated. I am in the fortunate position of being mortgage free, although the account is still open, i can withdraw money at 0.5% above base rate, I was thinking of doing this and investing in a fixed rate bond over two years, it seems simple as i can well afford the repayments, is there any downside i'm not seeing here, any comments would be welcome

Robert_Sterling_3

This should prove to be a good topic for debate and for that reason I will say no more at present.

tonygee_3

BOE expected to be reduced further on Thursday...Tuck in:beer:
But bear in mind rates could go back up as fast as theyve come down

dunstonh

Borrowing to invest. How risky is that!!

If you have the risk profile then its certainly a posibility. However, I doubt you do as most people do not. That said, i have a gut feeling you dont actually mean invest.

Lokolo

Rule #1 - Don't invest what you can't afford to lose.
Rule #2 - Don't borrow to invest.
Rule #3 - Buy lowish, sell high-ish

Not sure why you would withdraw money, pay interest on it, to then put it into investments. Why not use the extra money you have the moment to drip feed into investments? Thus meaning you don't pay any interest on the money..

brianc13

thanks for the replies maybe i should clarify, i can borrow that money at the rate i mentioned.
I will top up my isa's as usual.finding the best rate i can which you know are not great. That will still leave me with spare cash. In two years time i need to pay £10,000 do i borrow this now at the aforementioned rate,and invest it in a fixed rate bond or use my savings when the time comes,Not looking for advice just different opinions.

stevetodd

brianc13 wrote: »

thanks for the replies maybe i should clarify, i can borrow that money at the rate i mentioned.
I will top up my isa's as usual.finding the best rate i can which you know are not great. That will still leave me with spare cash. In two years time i need to pay £10,000 do i borrow this now at the aforementioned rate,and invest it in a fixed rate bond or use my savings when the time comes,Not looking for advice just different opinions.

You are talking about savings accounts, that is not investing

Robert_Sterling_3

It makes sense to me.

My three children, in the late 1980's did not need student loans because mum and dad gave them the amount they would be entitled to from SLC.

However they all took the loans and each put them into about 30 different building societies.
I have told this story in great detail as Robert Shilling and as Building Society Bob at Carpetbagger.com. and Themoneybag

They made a bob or two out of it.

The interest rates, tax free, the got from the BSs were higher than would later be paid to SLC.

Reaper

Since you mean saving not investing I would say yes, with the following conditions:

1) You can find an account that pays more net of tax than your mortgage costs you
2) You put it in a variable instant access account - not a fixed rate 2 year bond

The reason for point 2 is that the place you are borrowing from has variable rates. If inflation and interest rates were to shoot up in year 2 you don't want to be locked into a low paying fixed rate savings account.

brianc13

icici is offering 4.1% over two years if and i think its a big if, interest rates do rise over the next two years i have the funds to immediately clear the loan which at this moment in time has an interest rate of 1% might be lower tomorrow. basically in 2 years i need to pay £10,000 pounds which i have at present is this a cheap way of doing it, ie borrowing at the 1% and investing at 4.1%aer admittedly paying tax on the 4.1%

dunstonh

stop saying investing. You are not investing.