Should i stop offsetting and go into savings

Arbinvestor

Hi All

I am getting a little confused here. I currently have an outstanding (offset) mortgage of GBP205,000 with 108,000 of that being offset = so i am paying interest on only GBP97,000.

The interest on this offset mortgage is Bank of England Base + 1% so i am in effect paying 1.5%.

I am currently a non-resident for tax purposes in the UK. I do however have to declare my worldwide income with a marginal rate of 33%. This income would be taxed at this rate.

What i am stuggling to work out is how much i would need to get from a savings account to make it worthwhile to switch my money into a savings account and then just transfer interest to pay off my mortgage and if i would be better off. I think i should be (marginally) but i would need to get an interest rate of >2%. Is this correct?

Thanks for any help.

Arb

opinions4u

Your thinking along the right line.

2.25% is the figure I come up with as being the minimum rate you need to achieve.

1.5% / (100%-33%) = 2.23% ... rounded up to 2.25% for ease.

2.25% x 1/3rd = 0.75%.

2.25% - 0.75% = 1.5%.

Arbinvestor

Hi - that how i did the sums. Thanks for such a SPEEDY response. I am impressed. Now i need to see if i can find a home for my money which pays more than 2.5%!

Gorgeous_George

Hi

My offset is 1.24% at the moment. The offset funds were transferred to West Bromwich Building Society at 4.3%. I use the regular savers to earn 5% (Lloyds and First Direct) and I lend at Zopa (currently earning approximately 7% after Zopa fees and bad debt but before tax).

Oh, and I agree with the numbers. 2.25% should be beatable.

GG