Paying off mortgage

Laura72

My mortgage rate is 4% but my ISA is only 2.65%. Should I move my savings out of the ISA to pay funds towards my morgage?

The_Salad

In short . . . . . YES YES YES YES YES!! Thats what I'm doing, but it is all about striking the right balance. In the long term you will, most likely, save a fortune by paying off your mortgage early. But it is also nice to have some available cash savings for that rainy day or emergency. So try to do both, chip away at the mortgage but also put a little cash aside too if you can . . . and an ISA is the best place for that. Good luck!!

Totton

Paying lump sums into mortgage accounts can save a lot on the total cost of the mortgage, it is most likely worth doing this if you will not need that money. However, if you may need the money, say for a house repair, then look for a better ISA rate as 2.65% doesn't seem so hot when you can +3%. Whilst that doesn't seem much of a difference you are getting closer to the mortgage rate and ISA interest rates above 4% are available and likely to increase in the next couple of years.

If the mortgage is fixed at 4% then you need to consider how long that is fixed and take a view of where cash ISA interest rates are going. My own thought is that savers will continue to be 'punished' by the Govt. for their prudence, therefore I would pay off debt where interest rates are above savings rates.

HTH,
Mickey