Mortgage or ISA ?

WazKayani

All

First post although I have been reading through the forums for quite a while.
With days left before the ISA cut-off, would appreceiate some guidance.

I have a NatWest One mortgage (similar to OneAccount with all mortgage and savings in one place). My current mortgage interest rate is 3.65% and have approx 150K left on it. Received an annual bonus plus have some savings, and have enough money to get the missus and myself to open up a cash isa (Max £3600) each. The question I have and I have trawled through the forums and cannot find an exact response……....with interest rates on ISAs so low at the moment, is it better to open an ISA each (£7200 total) or put the money into the mortgage to try reduce it whilst the rates are low.
Any guidance would be appreceiated.

Cheers

Trying_to_be_good

Long term, better to have the ISAs as they're earning tax-free interest until the government decide to change the policy, even if the interest rates aren't great at the moment.

Get the best rates you can (ironically, NatWest are good at the moment), £7,200 by 5 April and a further £7,200 from 6 April.

dimbo61

Barclays paying 3.61% on new money ! in ISA,s
Natwest paying 3.51% if you put over £10,000 into account in one name !
If you cant get that rate then put in your offset account and keep saving like mad. GOOD LUCK

WazKayani

Sounds like the ISA is the way forward but hasn't Martin always said that any debt is bad and should be cleared with any savings.

Trying_to_be_good

No - it's all a matter of balance. He says clear bad debt (high interest type debt). And have a safety net of 3-6-9 month's expenditure as savings. And plan for the future (tax-free interest forever). Then clear the mortgage!

StuartGMC

What is your present LTV?

We're on a Natwest offset and whilst we have Stocks & Shares (Funds) ISAs, we haven't got Cash ISAs as we've targetted the mortgage first (present equivalent interest rate is about 0.66% due to offset).

If you want flexibility in future consider how long you'll keep the mortgage and whether you may move to another offset provider who will allow you to offset Cash ISAs, or if LTV is poor think about bringing that down now and increasing savings in future.

Overall, it really is a case of a balanced portfolio of saving, pension, investments etc plus clearing the mortgage debt.

If you have high confidence you won't call upon the Cash ISA at all then it may mean taking it is a good move as it will be there once mortgage-free; but, if you think you may need to call upon it in future (or you want to significantly reduce the mortgage capital incurring interest ahead of potential interest rate rises that may occur in 2010 onwards due to inflation, then putting it into your offset savings may be better.

Phlip_corter

StuartGMC wrote: »

What is your present LTV?

We're on a Natwest offset and whilst we have Stocks & Shares (Funds) ISAs, we haven't got Cash ISAs as we've targetted the mortgage first (present equivalent interest rate is about 0.66% due to offset).

If you want flexibility in future consider how long you'll keep the mortgage and whether you may move to another offset provider who will allow you to offset Cash ISAs, or if LTV is poor think about bringing that down now and increasing savings in future.

Overall, it really is a case of a balanced portfolio of saving, pension, investments etc plus clearing the mortgage debt.

If you have high confidence you won't call upon the Cash ISA at all then it may mean taking it is a good move as it will be there once mortgage-free; but, if you think you may need to call upon it in future (or you want to significantly reduce the mortgage capital incurring interest ahead of potential interest rate rises that may occur in 2010 onwards due to inflation, then putting it into your offset savings may be better.

Yes you are right.