Empty Offset Savings Account?

devontone

Hi, I’d appreciate some advice on what seems to be an obvious decision but I might be missing something. 

My partner and I have an offset mortgage fixed at 1.59% until March 2025, the balance on the mortgage is around £126k. We have c£80k in the offset savings account and can potentially add £30k more.

I’ve been a bit slow on the uptake but given that the mortgage interest rate is so low compared to savings accounts at the moment are we better off emptying the offset savings account and putting the money elsewhere for a year into a savings account which will probably have around double the rate of interest? I appreciate there may be tax considerations as the offset account isn’t taxed.

In a year’s time when we remortgage if I decide to stick with an offset mortgage (hopefully l won’t need to use those savings) then of course I can see how it will make sense to put as much as we can maximise into the offset savings account as the mortgage rate will be way higher (I suspect) and probably higher than savings rates.

Thanks in advance!

amnblog

Technically yes, if you can get more after tax from a savings account than the 1.59% the mortgage costs, you are in profit.

Flugelhorn

at one time my offset rate was  above savings rates and the benefit was tax free too - being a higher rate tax payer the decision to fill up the offset linked accounts was easy. If I had one now would be questioning whether it was such a good deal but then might be different when you remortgage - nothing wrong with saving the money elsewhere to get a bit more interest now