ISA offset mortgages

Charlton_Taz

Hi. Hoping someone can help me. I am looking at remortgaging in the next 6 months or so, and my preference would be to go with an offset mortgage with the ability to offset cash ISAs (as over the last 10 years OH and I have managed to build up a fairly sizeable sum in our ISAs). This would allow us to keep our savings within the ISA and to try and protect that tax wrapper for the future.

The only offset mortgage I've found online so far that lets you to offset ISA balances is with Barclays/Woolwich. As far as I can see no one else lets you offset ISAs at all . Do any of you knowledgeable people know of any other banks/building societies that would let you offset your ISAs against your mortgage? Thank you for your help!

High_Roller_2

Charlton Taz, apologies if this is a thread hijack but my question is semi-related to your situation. I wasn't aware that it was possible to offset an ISA. If First Direct did that then I wouldn't have the following question.

I may be getting ahead of myself as I still haven't exchanged contracts on my property purchase... but, assuming everything goes to plan (touch wood):

I have taken a First Direct Offset mortgage (3 years at 4.09%). I'm in the fortunate position that after completion I'll have nearly £20k in a cash ISA. Should I close my ISA and offset my mortgage (120 down to 100)? Effectively I'd be receiving 4.09% on my ISA, which is much better than any current ISA rates.

Or would this be foolish as, if I ever pay off the mortgage or move away from an Offset mortgage, I'll lose my tax-exempt savings pot.

Thanks,
High Roller

Joe_Bloggs

@Highroller
You do not say what interest rate you are getting for your ISAs. At the moment it seems the best cash ISA rates are with fixed rate products that lock the money in for the term. For example the Halifax Fixed rate ISA Saver . You can get 4% for three years of 3.5% for two years. It is not necessary to throw your ISA allowance away if you can find similar or better returns elsewhere.

The Woolwich offset with ISA is a nice touch. I remember Intelligent Finance used to provide this feature. There is nothing to stop any lender from offering this feature other than the fear of losing mortgage interest.

J_B.

gwapenut

It may be better to keep your mortgage and ISA providers separate. I make a profit on my ISAs - get about 3.2% versus mortgage rate of 1.89%.

Appreciate not everyone has access to low mortgage rates, but it may be possible for you to do better this way than merely "breaking even" by offsetting.

High_Roller_2

Thanks both,

At the moment I'm getting a poor rate on my ISAs (about 2.5%) but I can't believe there'll be any available above 4.09% before base rate/swap rates start increasing. Ironically, I think the best offer accepted transfers is FD's 3% fixed until November 2010. It's a shame they don't allow it to be offset.

I think I'm probably best to keep my ISA and keep moving it around to the best deal. Short-term loss for long-term gain hopefully.

Captain_Chaos_2-2

Hi guuys dont know anyone else who offers the offset on ISA's ... and defo would not cash in isa's if can offset with a provider if you not tied with HSBC move to woolwich if thy can give ou more.

Keep ISA's tax free bracket when the mortgage is finished with you'll still have the in that nice tax free bracket, once out cant put it back

getmore4less

One downside to offsetting ISA is they no longer accumulate funds for the long term tax benifits.

The calculations become quite complex to decide if this is worth bothering with.

Offsetting still better than cashing in

Captain_Chaos_2-2

One downside to offsetting ISA is they no longer accumulate funds for the long term tax benifits.

Isa rates aren't great at the moment anyhow some wouldn't acumilating much. He can still pay in his annual allowance though no restrictiosn thee.

getmore4less

Captain_Chaos wrote: »

One downside to offsetting ISA is they no longer accumulate funds for the long term tax benifits.

Isa rates aren't great at the moment anyhow some wouldn't acumilating much. He can still pay in his annual allowance though no restrictiosn thee.

Thing is even at a low ISA rate say 3% offsetting makes a difference in the final pot that if you will hit 40% tax makes a big diference.

£300pm over 10 years.

offset £36000
3% £41,927.70

If on an offset tracker there are usualy ISAs that pay close to the mortgage, mine pay more.