First direct reg saver or ISA

mogul26

Which would be the best option to save a pot of money to reduce my mortgage in the future?

I have a mortgage fixed for 5 years at 3.95% with HSBC with 18 yrs to go, i have been considering making regular payments to reduce the interest paid and term.

The best ISA's pay around 3.3%, another option is First Directs Regular savers account paying 8% before tax, is this a better rate of interest than the ISA's on offer and a better option than paying the mortgage down.

I pay tax at the lower rate

Thank you

dave_ave

If you are paying 3.95% with HSBC, why not just reduce the mortgage? If you want some cash not tied up with a mortgage how about Santander's 4% Major ISA, fixed for 2 years? I guess you are thinking about 5 years time for reducing the mortgage?

Jevvers

Do you have a lump sum? The best cash ISAs need a fairly high minimum balance to get the decent rate.

If you don't have a lump sum the FD is good - I'm in this situ and have taken one out. But be aware that you can only pay £300 into the account per month and its only 8% for a year.

Have a look at the MSE calculator for whether you should pay the mortgage or save.

King_Weasel

The 8% (gross) beats any ISA and your mortgage interest rate so if you don't need the cash in the next year you might as well open the Regular Saver and pay off a bit of your mortgage in a year's time. Unless you can find another savings rate that beats 3.95% presumably you would otherwise be better off reducing your mortgage now, though you must be sure you won't need the cash for any other purpose.