Mortgage Overpayment or ISA?

Scaisi

I am considering transferring £5000 from my ISA savings account into my offset mortgage which has an interest rate of 3.49%.
I had intended to transfer the funds from my current ISA into the Santander ISA offering 3.3% but have experienced problems with them.

I would welcome advice from fellow board members as to whether or not this is a sensible move – I can withdraw funds from the offset account at any time should the need arise, but I am aware that once I cancel my ISA account the tax benefit will be lost.

Any advice appreciated.

harvey115

Why don't you open an ISA with your mortgage provider and transfer your funds there?

This way you retain your tax free amount and get a better interest rate!

Scaisi

My mortgage account is with Santander. I have not encountered any problems with this account, but attempting to transfer my ISA funds to them has been a nightmare.

harvey115

I think if you want to be in a best position you should transfer the ISA to a linked offset to your mortgage, reasons as above.

However you can get good rates through other providers as well, maybe fixing the ISA for an year or so if the funds are not needed immediately. This gets better interest rate in the market as compared to the instant access ISA.