Flexible offset mortgage

wibbly_wobbly

Hi I have a very low mortgage rate of 1.5% and was going to reinvest some but my mortgage lender says that it i would have to be offered an interest rate of 4.75% before it is worth taking any money out. That seems a lot to me as I worked out I would only need more than 1.9% to start making a profit. Can anyone advise?

Gorgeous_George

With a mortgage rate of 1.5% (assuming it is not a BTL mortgage and it attracts no tax breaks)...

If you pay tax at 20%, you break even at 1.875% (assuming no loss of interest during the transfer). For a 40% taxpayer the break even point is 2.5%.

Both figures are gross (i.e., before tax).

No wonder the banks are in trouble.

GG

wibbly_wobbly

Thanks but what is a BTL? i'm a bit ignorant about this. I am a basic rate taxpayer.

Peelerfart

" Thanks but what is a BTL? "

Buy To Let mortgage

PS George

(I think I've got what your looking for !)

Gorgeous_George

Peelerfart wrote: »

... PS George

(I think I've got what your looking for !)

What are you doing with my Rolf Harris CD?

(Or is it my marbles?)

GG

Gorgeous_George

I've just realised what your post meant!

I'M NOT AT MY BEST TODAY.

:rotfl:

GG

Conrad

Be aware the interest on savings will be added to your other income for the purpose of calculating your Tax, meaning you could end up in a higher Tax band.
Let's say rates stay low like this for 18 months. On a £50,000 you would make something like £2000 or £3000 assuming your mortgage rate and savings rate retain thier differential spread, although in reality I think mortgage rates will rise faster than savings. Is it really worth it, unless you are investing in another property (I'd suggest Saidia Morocco - for investing btw)

Gorgeous_George

2009/10...

Personal allowance...£6,475 (you pay no tax on this amount)

Starting rate for savings (10%)...£2,440 (earn more than this in interest and you pay 20% on all of the interest) (if you earn more than the personal allowance)

Basic rate (20%)...up to the next £37,400

Higher rate (40%)... everything else.

So, you could earn £46,315 before you pay 40% tax if £2,440 is from interest on taxable savings (ISAs don't count).

Please correct me if I'm wrong.

That is a long way from where I am.

(link)

GG

noh

I'm in exactly the same position as the OP.
I have a First Direct offset mortgage and when the rate dropped to 1.5% I withdrew 45k and put it in my egg savings account currently paying 6.3% till August.
Will move it to a Halifax account that pays 6% till November then will have to think again.
Crossing the 40% tax threshold is something to bear in mind. I crossed this threshold due to savings income last year and may do this year. I usually mitigate this by paying the surplus above the threshold into a pension.

noh

Conrad wrote: »

Be aware the interest on savings will be added to your other income for the purpose of calculating your Tax, meaning you could end up in a higher Tax band.
Let's say rates stay low like this for 18 months. On a £50,000 you would make something like £2000 or £3000 assuming your mortgage rate and savings rate retain thier differential spread, although in reality I think mortgage rates will rise faster than savings. Is it really worth it, unless you are investing in another property (I'd suggest Saidia Morocco - for investing btw)

For £2000 its worth it. Even for £200
It's just a few mouse clicks.