Background: I have an offset mortgage on my house. I specifically chose an offset mortgage as my employment circumstances mean there will be irregular and unpredictable cash flows in and out during the term of the mortgage. The interest rate on the offset mortgage (which is fixed until March 2018) is 3.05%.
The UK has been in an 'exceptional', 'unprecedented', 'unsustainable' low base rate era for some seven years now, and (although it's taken a while) real-world borrowing rates have come down and down, to the point where in the past few months I've started to see unsecured personal loans being offered at as little as 3%.
So what I think I'm looking at here is the opportunity to borrow at 3% and lend at 3.05%—in which case I should jump at the chance, right? (subject to acceptance on the loan of course) But I'm not sure if offseting a 3.05% mortgage exactly corresponds to getting a 3.05% return, or if it's just a handy rule of thumb.
Are there any reasons not to borrow as much as I can at 3% APR and put all the money in an account offsetting a 3.05% p.a. mortgage? Do I need to fire up Excel to model the true effective returns and the exact details of when repayments take place and when the offset recalc is performed—or is it enough to say "3% is less than 3.05%, do it" ?
(Please note the united-kingdom as I know many mortgage- and loan-related facts are different from united-states. Also I'm not remotely worried about cash flow or budgetary discipline—I'm very good at not spending money that I know isn't mine.)