Offset flexible mortgage - useful?

S

Shaz

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I have a First Active Offset Flexible Mortgage (OFM) which before yesterday had an interest rate of 4.9%. I thought this mortgage was a good idea at the time as the interest calculations will be reduced if I have savings in it as well (in the savings account bit attached to the mortgage).

But now with the existence of regular savings accounts paying interest as high as 7.1% (AIB), etc, I am wondering if the OFM is useful at all. Should I avail for a lower interest mortgage and save my money in one the high interest paying savings accounts? Or are these high interest rates a temporary thing and the interest rate offered on savings accounts will revert to below ECB in the near future?
 
If I understand it correctly, having money in these types of offset accounts doesn't earn you interest. By reducing the balance of your mortgage, albeit temporarily, it reduces the interest you pay on your mortgage. The money saved is not therefore subject to DIRT. I always thought this was one of the main selling points of these types of mortgage account.

To make a like-for-like comparison, therefore, you need to compare the offset account rate with the after-tax rate of the savings account.
 
Not necessarily true, depending where you fit in the TRS bracket the DIRT deduction on the interest earned cancels out the TRS lost on the interest paid so assuming all your interest is eligible for TRS then break even point at the moment on 4.9% mortgage rate will also be 4.9% gross on savings.
 
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