offset vs. ISA?

willy_2

Hi folks
just wondering if anyone has a formula for the ISA vs. offset question. In a nutshell we've got 23yrs left on a YBS mortgage of 220K (3 yrs left fixed at 5.29%) . We've also got 14K in ISAs which I've just realised are making virtually nothing sat in a First Direct account. Question is will we be better in the long run to move the ISAs to a better deal and keep the tax free status or offset it against the mortgage and effectively earn 5.29% for the next 3 years?
Any thoughts gratefully received.

thanks

Willy

dimbo61

Hi willy
I also have the same problem
Have an offset mortgage with YBS and have some savings in ISA,s earning about 3% from april yet I am paying 4.74% on my mortgage !!
I will lose the TAX free wrapper by putting my savings back into the offset but I dont want to pay extra interest if I dont need to.
The YBS recently contacted me about this very point ( would you like to have ISA,s allowed in your offset accounts I said yes please )
Still waiting for things to happen so for now into offset then back to ISA,s if YBS get there act sorted out
The savings in the offset earn no interest but save you 5.29% TAX FREE
GOOD LUCK

willy_2

Hi dimbo61
thanks for the info. Did YBS mean that you can have the tax free ISAs transferred from your current provider and house them in your offset account? I presume you don't get any interest but save on the mortgage? I'm on the phone to them tomorrow, probably get an answer next year - going on my experience of their call centre.....

Will

dimbo61

Yes transfer my existing ISA,s to YBS and add £3600 in april but like I said they were just finding out peoples opinions so nothing sorted yet.
You get no interest but save your mortgage interest rate on the ISA,s in the offset.
Spoke to local branch ( news to them !!! ) but liked the idea just takes a long time at YBS to get things sorted !!!
I first asked 3 years ago and told that no one would be interested/ too difficult to do BLAH BLAH

gil13

It's a good idea if my view to be able in include ISA's in a linked to offset account. Just wish First Direct would wake up and offer the same.

willy_2

couldn't agree more. I bank with FD because of the customer service, not for the interest rates. I don't see any reason why you can't have tax free savings in an offset account.

Anon

willy wrote: »

I don't see any reason why you can't have tax free savings in an offset account.

... apart from the obvious one that FD and many other providers don't offer the facility to :rolleyes: :rotfl:

Anon

marleyj

I've been emailing FD about this in the last few days. They say they can't do this because a Cash ISA is a sole account and regulated. I don't have a joint mortgage and I know that Barclays do allow for Cash ISA accounts to be used to offset so I'm not satisfied with their response. It would make short-term sense for me to close all my Cash ISAs and use the cash to offset my FD mortgage but it would be nice not to lose the long-term benefit of the tax free ISA wrapper

BARGAINHUNTER!

I have an IF offset mortgage account, and I have jars - a savings jar, a current account jar, a mortgage jar and an isa jar. They all net off against the mortgage account. At the beginning of the tax year I transfer the max from my savings jar into my isa jar. Doesent make a dfference interest wise as its all offset but it means that the amount in the isa is protected and I can transfer it straight to another isa provider without losing its tax free status.

willy_2

just had an email back from YBS stating that if I transfer my ISAs into my offset account it will loose its tax free status. That was the clearest communication I've ever had from them.......

dimbo61

£14k in the offset is only 2 years of ISA,s for you both so if it saves you 5.29% thats better than most ISA,s on the market.