Offsetting and ISA accounts

pardal51

Hi all,

I am a bit on a dilemma at the moment...

We've got an offset mortgage at 2.79% (2.29% + BoE lifetime tracker).

Outstanding balance: c£159K
Currently offsetting: c£38K

We normally pay interest and the capital portion (overpaying) even though it is an interest only mortgage.

However we also have around c£87K on ISA accounts at 3% which will be slashed to 2% in November. A quick look around and I could not find a bank or building society offering anything over 2.79%

My question is: is it worthy withdrawing all our ISA savings and offset the mortgage, as the interest rate would be higher?

Comments and suggestions are appreciated.

vacheron

Many offset mortgages allow you to offset ISAs.

Our Barclays one certainly does.

Thrugelmir

In principle yes, pay down the mortgage or deposit the money in the offset.

Do you have a reason for holding so much in "cash"?

michaels

Cash in the ISAs and you lose the tax advantage forever, if interest rates increase again it will be much more valuable so it is not a no-brainer. Interest rates are promised to stay low for at least 2 years - can you get a better ISA rate if you fix for that long?

pardal51

Many offset mortgages allow you to offset ISAs.

Our Barclays one certainly does.

FD does not as far as I am aware

In principle yes, pay down the mortgage or deposit the money in the offset.

Do you have a reason for holding so much in "cash"?

We just built up this amount over the years to take advantage of tax-free allowance. Which other low-risk savings/investment would you suggest?

Cash in the ISAs and you lose the tax advantage forever, if interest rates increase again it will be much more valuable so it is not a no-brainer. Interest rates are promised to stay low for at least 2 years - can you get a better ISA rate if you fix for that long?

Hence my thread...I will have to shop around, but at the moment the rates are not attractive at all.