savings versus mortgage query

snowmen

hello all,
I have a nationwide repayment mortgage and further advance both at their BMR currently at 6.74%. I have kept the BMR rate due to the flexible features - i.e. no charges for any overpayments/lump sums/term changes.
The two of them add up to a debt of £36,000.
I have an isa (allowance used for the year) with £9500 in it currently paying at 5.05% and an internet saver account with £6700 in it currently paying at 5.30%.
I dont have any other loans.
Would I be right in saying that I am best to pay off the most I can on the mortgage (probably waiting to get my interest on both of the accounts above first payable at the end of this month)?
I know people talk about keeping 6 months money saved just in case of difficulties/losing you job etc but is this really necessary as I have ppi and I can borrow back what I have overspent on the mortgage anyway at anytime for no extra cost.
I would be interested in your views.

Jonbvn

Your ISA rate is poor. You can get 6.5% at the moment. Personally, I would change ISA provider and keep the money for retirement/rainy day. Remember it will take 3 tax years to accumulate the same amount of ISA money again at 3600 per year.

Since you probably pay tax, your internet saver is only worth 4.24% net. Therefore, I would suggest you pay this off your mortgage.

lamorna23

snowmen wrote: »

hello all,
I have a nationwide repayment mortgage and further advance both at their BMR currently at 6.74%. I have kept the BMR rate due to the flexible features - i.e. no charges for any overpayments/lump sums/term changes.
The two of them add up to a debt of £36,000.
I have an isa (allowance used for the year) with £9500 in it currently paying at 5.05% and an internet saver account with £6700 in it currently paying at 5.30%.
I dont have any other loans.
Would I be right in saying that I am best to pay off the most I can on the mortgage (probably waiting to get my interest on both of the accounts above first payable at the end of this month)?
I know people talk about keeping 6 months money saved just in case of difficulties/losing you job etc but is this really necessary as I have ppi and I can borrow back what I have overspent on the mortgage anyway at anytime for no extra cost.
I would be interested in your views.

You have few choices depending on your requirements, Jonbvn has given good advice and I see that as a half measure. The way I see it the best way for you to maximise your situation is to change mortgage provider and change ISA.

The rule of thumb is as long as the savings rate is higher than the debt rate then you're best bet is keep the savings. With the mortgage rate you quoted, if you dont want to change provider you're best paying a big lump sum with the whole lot. This is what I'd do but that's me... Use £3600 from the eSaver for next years ISA allowance, transfer in previous ISA's (check that you can) to get a better rate on the whole £13,100.

Then looking at the best other rates you can get 8.5% on £2500 with an Alliance and Leicester current account (check full T&C), which after tax will work out to be similar to a top rate ISA, then you could either make an overpayment on the Nationwide BMR, or use the £600 as a fee etc on a better mortgage rate.

As I understand it that would maximise your current funds.

Dithering_Dad

If you want to hold onto your ISAs but also want to overpay on your mortgage, why not get an offset mortgage that allows you to offset ISAs. I think Intelligent Finance allow you to do this.

Seems to be a good compromise between reducing your mortgage and keeping your isas.