Savings v IF offset

Sisters4

I have a mortgage, current account, ISA and Savings with Intelligent Finance. The interest on all is offset against my mortgage. How do I find out whether I would be better off putting my savings into one of Martins suggested high interest on line accounts or continuing with offset ?

oldfella

compare the interest you are paying on the mortgage with savings accounts

noh

oldfella wrote: »

compare the interest you are paying on the mortgage with savings accounts

But remember that the offset amount is effectively earning interest at the mortgage rate and any amount in a savings account will be subject to at least 20% tax assuming you are a taxpayer.
For example if your mortgage rate is 6.2% £10000 in an offset account gives you a benifit of £620.
£10000 in a savings account at 6.2% gives you a benifit of £620 X 0.8 = £496

Nigel

Sisters4

noh wrote: »

But remember that the offset amount is effectively earning interest at the mortgage rate and any amount in a savings account will be subject to at least 20% tax assuming you are a taxpayer.
For example if your mortgage rate is 6.2% £10000 in an offset account gives you a benifit of £620.
£10000 in a savings account at 6.2% gives you a benifit of £620 X 0.8 = £496

Nigel

So the savings account interest rate would need to be considerably higher than the mortgage rate for me to benefit as I am a taxpayer. As my mortgage rate is currently 6.24% I think I'm better off sticking with the offset ... thanks for the responses

noh

Yes at your mortgage rate you will need to find a savings account paying more than 7.8% gross to be better off. Assuming you are a standard rate taxpayer.

Nigel

mk-donald

And if you are a 40% higher rate tax payer then that effective 6.24% (net) that your savings are earning in offsetting mortgage interest would need to be grossed up to 10.4% which is decidedly rare to find

ie 10.4% less 40% tax = 6.24% net