The One Account mortgage shrinker or not?

wendylou_3

Help needed!
We currently have a One Account mortgage account which has approx 11 years to run.We also have recently won an endowment claim and have approx £11,000 sitting in a savings account.
The One Account has suggested the 'mortgage shrinker' idea of putting the cash in the 'One Account' current account therefore reducing the term of the mortgage.
But,i'm confused! Is this the right thing to do? We would like to keep the cash available rather than pay a lump sum off the mortgage.
Are we paying over the odds in interest?
Is there a better way to invest (no risks) the endowment payoff?
Need your advice moneysaving experts!!!

payless

I assume you would still have assess to funds anyway in the current account .

If I'm reading the situation right- your "return" will be the mortgage rate ( no tax to pay) .. you are unlikely to get a better ( risk free) return, especially as that mortgage is not teh cheapest around, this fact and the fact you are questioning it makes me wonder if you might not be making the best of the options avialable on this arrangement / Query is this the right mortgage for you ??

wendylou_3

Does anyone know of any better offers than the One Account?
Their interest rate is currently 5.85% on the mortgage current account....

Joe_Bloggs

YBS do a 0.45% Base rate tracker, thats 5.2%. The whole purpose of the offset feature is that you put any spare cash or savings in the savings/current account to cancel out some of the interest you are paying on the mortgage. The more money you can offset the less interest you pay and the more of the monthly payment will be allocated to paying off capital. Match the mortgage amount with savings or temporary cash and you don't pay any interest on the mortgage.
A useful thread here.

J_B.

jamesd

Leek United do an offset tracker at 4.99% that might be a better deal than the YBS product. If you aren't planning to take money out often, a flexible mortgage with lower rates will have a lower interest rate than an offset or current account mortgage.

Better to have a word with a whole of market mortgage broker to see if they can come up with something better. It's not going to be hard to make you better off than you are with the One Account morgage extender.

Once you have a mortgage with a decent interest rate you might consider putting 3,000 each into the 5.75% cash ISA offered by Ruffler Bank. That's a higher rate of interest than the mortgage you're likely to end up with, so it'll be better put there than into the mortgage. You might temporarily put the rest of the endowment money into an offset account or flexible overpayment, then move it also into the ISA after the new tax year starts.