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**abossakon** · 08-31-2012, 07:57 PM

In a low interest environment, the easiest, no thought required thing to do is get an offset mortgage (assuming rates are not higher than "normal" mortgages, you're due to remortgage and the fees aren't prohibitive). The effective rates gained on your savings are the mortgage rate x (1+ plus your marginal tax rate). You're holding cash so the risk is low too.

Then when you have time to think about it properly or assess your risk level, you take the cash and treat the mortgage like a normal one.

While you are correct in theory (a Firstdirect example showed you needed to have at least ~7% return to beat the benefits of ofsetting if you're a high tax-rate payer), don't forget that you probably have no protection on that cash you pay in to offset the debt. If the bank goes belly up, you most likely will have to pay back the mortgage while losing the cash you had put on the offset account... [nb: I have not double checked this but thought about it the other day - it's quite a scary scenario].

Other options that are quite interesting at the moment are high dividend yielding stocks. With cash and bond yield so low, investors are suddenly seeing high-yielding equities as an interesting vehicle at the moment.

08-31-2012, 07:57 PM	#17
abossakon Join Date Oct 2005 Posts 540 Senior Member	In a low interest environment, the easiest, no thought required thing to do is get an offset mortgage (assuming rates are not higher than "normal" mortgages, you're due to remortgage and the fees aren't prohibitive). The effective rates gained on your savings are the mortgage rate x (1+ plus your marginal tax rate). You're holding cash so the risk is low too. Then when you have time to think about it properly or assess your risk level, you take the cash and treat the mortgage like a normal one. While you are correct in theory (a Firstdirect example showed you needed to have at least ~7% return to beat the benefits of ofsetting if you're a high tax-rate payer), don't forget that you probably have no protection on that cash you pay in to offset the debt. If the bank goes belly up, you most likely will have to pay back the mortgage while losing the cash you had put on the offset account... [nb: I have not double checked this but thought about it the other day - it's quite a scary scenario]. Other options that are quite interesting at the moment are high dividend yielding stocks. With cash and bond yield so low, investors are suddenly seeing high-yielding equities as an interesting vehicle at the moment.
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