Mortgage free not wannabee

Camdoon

I have a mortgage of £100,000 and savings of £120k. My mortgage is flexible and not repayable for seven and a half years. It has an interest rate of .49% above base rate so is .99% at present.
Previously I had paid down the mortgage then bought a car, new kitchen and extension given that this was all covered by various endowments that I had previously written off because of their underperformance. I am determined not to do that again.
In normal times I would have paid off the mortgage and that would be the end of it but if I can link to the base rate (presumably over 1% above base) then I can make a guaranteed profit with no/little risk.
What are my opportunities for making money out of this? I am also paying off the mortgage at an extra £100pcm as I was used to having a £500pcm mortgage.
The £100k is in a Santander Esaver joint account so is not at risk at all as it is offset with the mortgage from them. The 20k is in ISAs and we will be able to fully fund cash ISAs for the next 7 years. My wife and I are both standard rate tax payers.
Would Santander buy me out of the mortgage?
Can I tie up the money for 7 years and do better?
Any other ideas?

Porcupine

If it were me, I'd put a lump in a long fixed-term account (whatever gives the best rates). Maybe tier it - put the money you'll need in 5 years in a 5 year account, the same for 4/3/2/1 years, and keep a good instant access fund handy. Stop overpaying, and use a regular saver account for your income if you can find a decent one. As you're going to be withdrawing this money in the medium term, ISAs only have benefit as far as their current interest rate goes (ie you're not going to be keeping them for decades), so simply work it out which is better depending on your tax position. Probably ISAs will still win, but not always.

The main thing is to have a bailout plan in case mortgage rates increase and you decide to pay it back, so pick accounts where you can withdraw (usually with some penalty). You just need to do some sums to work out what you might do in each scenario (eg, what if base rate goes up 2% in 2 years time)? For example, let's say you had to take money out of a '365 day withdrawal penalty' account. That's a year's interest. How would that compare with the lower rate of an instant-access account, based on your guess of how likely it might be that you need to withdraw early? There's too many unknowns and too many variables, but it should give you a feel for how much margin for the unexpected you have.

opinions4u

Easy access accounts including ISA is where I'd head. Aim for 3% plus and remember to factor in tax for non-ISA funds.

Keep an eye in both mortgage and savings rates, including bonus rates dropping off, and you should be able to guarantee a profit.

Camdoon

Thanks for the responses but had hoped to find an account or bond which would guarantee a rate of x% over base for the next up to 7 years.
There are lists of the best interest paying accounts, best fixed term etc but none for best over base rate.
I hate this game that banks and building societies play where they continually shunt accounts from being their best paying into the worst paying after a year relying on a large percentage of their customers to not update.

MoneySaverLog

Lloyds TSB 18 month tracker by which point BOE base rates may decide to go north - http://www.lloydstsb.com/savings/tracker_bond.asp

Porcupine

Investec High 5 (issue 2) or High 10? Not base rate linked, but they do the rate tart thing for you.

Camdoon

Interesting the Investec 10 accounts. They also have a money market account tracking LIBOR:eek:. I suppose no-one is going to be caught suppressing this rate in the near future.

I have written to Santander suggesting that they will make more money buying me out the mortgage. So instead of paying me 2.4% a month they could lending it at 4.89%.

lisyloo

Would Santander buy me out of the mortgage?

Very unlikely but please let me know if they do as I have a similar rate to you (but with First Direct).