ISA or offset mortgage?

komodoTS

Hey

I've got an offset mortgage of around £60k with interest rate of 1.95%. There's just under £6k in the linked savings account.

I've also got an easy access ISA containing £3k that pays 0.5%. I make monthly payments of £100 into both the offset and ISA. I'll occasionally transfer additional amounts as and when available.

I chose the offset mortgage as wanted to get the benefits of making overpayments but retain easy access to a rainy day fund, or for home improvements.

But with the lowering interest rates on ISAs I'm wondering whether it's worth closing the ISA and putting all the funds into the offset? I'm not really earning much in the way of interest and I don't need the interest for income so feel my money would work harder in the offset. Would there be any benefits in retaining an ISA, even with the minimum amount deposited, or should I close the ISA and think about opening one again if, and when (!!), ISA interest rates increase above the offset interest rate?

Many thanks!

masonic

If you just have £3k in the cash ISA, then you would have no trouble putting it all back in the ISA should circumstances change. If you can readily access the money in the offset, then you'll be hard pushed to earn enough on cash savings elsewhere to make it worth holding other savings accounts.