Mortgage Offset Question

thenudeone

thenudeone wrote: »

As I am sure you understand, there is a risk that even over a longish period of 5-10 years, stock market based investments will not provide better returns than cash.

Of course what I should have said was "there is a risk that even over a longish period of 5-10 years, stock market based investments will not provide any returns at all, and no guarantee that 100% of your capital will remain"

lisyloo

Absolute guaranteed profit to be made - barring the most quick and unprecedented raise in Base Rates ever seen.

Use investments, then you are setting yourself up for a huge risk.

Not a very big return especially for tax payers.
Of course S&S is a risk, but there are much higher returns to be made. It's a risk/return thing which of course the buyer has to be happy with.
Higher risk can result in high rewards (or higher loss).

there is a risk that even over a longish period of 5-10 years, stock market based investments will not provide any returns at all

It's possible but unlikely.
You also have to take a view of where you think the stockmarket is right now and whether it's represents value (personally I think it does).

You can also use an advisor who actually manages your funds.
My advisor review my portfolio at least quarterly (and meets monthly), so I get ongoing advice for 0.5% per annum.
I'm not saying a loss is not possible because of course it is, but you can reduce the chances by regularly reviewing the performing and switching where necessary.
If I get advice to switch a fund then I do so.

I am not promoting a 100% S&S approach, just saying the 100% cash approach is overly cautious.
I'm 40% S&S and 60% cash and I would consider myself as medium.

Loughton_Monkey

lisyloo wrote: »

Not a very big return especially for tax payers.....

Undertood. But to me, it's just something you 'do'. I had a fully offset mortgage for around £210K at 1.5%. I drew it all out and it's earning 3.85% [3.08% net]. So £210K at 1.58% is a net profit of £3,318 a year.

Risk? Virtually zero - unless Base Rate had shot up in an unprecedented way. Work involved: Zero.

So better than a slap round the face with a wet fish. Especially when retired.

lisyloo

Risk? Virtually zero - unless Base Rate had shot up in an unprecedented way. Work involved: Zero.

Totally agree with you that's it's no risk, no work and and a no brainer.
If you are happy with that then that's great.

With the stock market surging ahead I've been happy to take some risk on part of the money to get greater returns.
The level of risk/return that you want is an entirely personal thing.
Personally I'd be dissatfied with low returns when there have been good opportunities on the stock market.
But I'm not so comfortable with the risk that I want all my money there, so I have found a balance that's good for me.
Another advantage is that is give us another £10K ISA allowance between the two of us, which is very valuable as it's tax free for life (although that's a bonus rather than a driving factor).
I am merely trying to paint a balanced picture.
"stick it all in a savings" account, does rule out a load of options which some people may wish to consider.