Should I pay off my mortgage if my ISA rate is higher than my mortgage rate?

Macce

Hi,

SUMMARY:

Mortgage = £14,900 @ 5.95%
ISA - taxfree = £29,000 @ 6%

(the mortgage is a flexible tracker so tracks the BoE and I can make withdrawals as well as under & over payments anytime without penalty).

I dont want to completely pay off my mortgage, as I would like to leave £1 and go on a payment holiday to allow me flexibility to withdrawn funds to buy a car soon.

Question is when my ISA matures in April should I transfer money from it to my mortgage to achieve my £1 balance goal when the interest rate of my ISA is higher than my mortgage?

....also as the BoE is most likely to lower rates this year my mortgage rate is also likely to fall further perhaps to 5.7% or 5.45% depending on how many quarter point cuts they decide to take.

Looking at the ISA best buy tables you can get 6.25% ISA's from some banks so 2nd option would be to not make the lump sum mortgage payment but instead transfer my ISA funds to one of these 6.25% accounts and get a better return.

Any advice folks ? What would you do? I still want the satisfaction of seeing that £1 mortgage balance and benifit from the payment holiday !!! but at the moment it doesn't make financial sense!

Thanks

Macce

JonnyBravo

How much is that satisfaction worth to you?

You clearly realise (correctly) you're better off in monetary terms not paying it off so answering that question should decide it for you.

dimbo61

lloydstsb paying 6.5% ISA,s if you pay in over £9000+ fixed for one year !!
so if you pay all your existing ISA,s into this account and top up with £3600
this year you will earn even more interest.
If you can also pay some of your mortgage off in the next year you will be
well on the way to building up a large Tax free nestegg for the future/
retirement fund GOOD LUCK

DrGUID

Depends how stable your job is - now is a good time to ensure you have good cash reserves.