Offset Mortage queries

Andy1977

Hi,

I have a couple of questions regarding offset mortgages:

1. I am interested in the First direct base rate offset which currently would have an interest rate of 2.79%. However most of my savings are in mini cash isas and earning a similar rate or even slightly more. Even my non isa savings (mainly regular savers at around 5%) are a better rate even with tax taken into consideration (I'm a basic rate taxpayer). Therefore, at the outset I wouldn't actually want to offset most of my savings - particularly as First Direct don't allow you to offset isas and I am reluctant to lose the tax free isas' status. This would seem to miss the point somewhat of having an offset mortage. However, my thinking is that savings rates are unusually high in relation to the base rate at the moment and in all likelihood, as the base rate rises, the differential between that and savings rates will decrease making the offset feature more appealing. Is my logic correct here? Am I right to consider taking on an offset mortgage and potentially keeping most of my savings away from it?

2. Maybe a silly question but... offset mortages are interest only by default although I had intended making mine repayment style. However, is there any advantage to making it repayment rather than using the repayment portion to offset instead? Surely, financially it makes no difference as the effect on interest is the same but you retain the flexibility of having your money readily available in your account? I'm struggling to see any advantage of making it repayment style (assuming of course I DO offset the repayment portion and don't go and spend it!)

Sorry for the ramble and thanks in advance for your thoughts.
Andy