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michaels wrote: »
I think their are two biggies not included in this basic model that should be highlighted:
1) Tax credits
If you are on tax credits and earn more than £300 interest per year (outside ISAs) then the interest will result in a withdrawal of tax credit at the rate of 41p in the £ on top of any tax on the interest so an effective rate of 61% for basic rate tax payers!!!
Using savings to pay down a mortgage may allow a lower ltv band on re-mortgage which is likely to have a much greater impact on the mortgage rate and hence total interest cots than any earnings from savings interest.
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