What caught my eye this week.

The Christmas break seems to be whizzing by even faster than usual this year. Perhaps it’s the cliché of time speeding up as you get older? Or maybe there’s just too much going on these days for us to ever slow down.

Forty years ago I’d go through our copy of the Radio Times with a pencil, circling my can’t-miss but must-wait-for TV shows and movies with patient delight. Of course nostalgia looms large – I’m sure I’d feel frustrated within hours if teleported back to 1985 and made to wait for the library to open to conduct even the most trivial factcheck  – but at least yesteryear’s enforced boredom seemed to bend spacetime a little, like a track athlete forced to take the slower route on the tardier outside lane.

It’s impossible for an info-junkie like me to get bored in today’s always-on era, which seems like a good thing. But it’s also hard to switch off. And I’m far from the worst I know.

At least I sleep with my iPhone in another room and I have it permanently on silent mode. I don’t conduct Whatsapp chat conferences under the blankets. I’m well-adjusted!

Little link list

One benefit of me slinking away from family and friends to unfold my laptop is I do have some links for you. So if you’ve had enough of Christmas jingles, pistachios, panettones, and your in-laws, then the next 30 minutes of investing nerd-outery is for you.

We’ll be back again on Saturday 3 January. Until then I’ll wish you a great weekend and a Happy New Year. May your index funds track with minimal error, your letters from HMRC contain only positive surprises, and any ill-advised punts pay-off just enough to be fun – but not enough to encourage you to see any unwarranted portents of skill.

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What caught my eye this week.

How was your 2025? I mostly mean from a personal finance and investing perspective – let’s put politics aside in this season of goodwill – but also, well, what were the vibes like?

For me it’s been a switchback ride. Both in my portfolio and my musings about the future of humanity / my ability to earn a crust. And for the same reason.

I’m talking, of course, about AI.

Weird science

When I first began dropping AI links into Weekend Reading following ChatGPT’s release, some Monevator readers were bemused.

Was this blog about to change its tagline to Motivation for the Terminally Online? What was the big deal?

I’d been following AI’s rapid advances for a while though, thanks to a lapsed background in computer science and friends still working in the field — including at the highest levels. So I knew that pumping vast amounts of data through GPUs had already been producing astonishing results with images for years.

Then Google’s transformers helped apply the same scaling magic to language – the stuff of human thought and reason. And all at once some AI insiders were talking about creating the minds of gods.

That hasn’t happened yet, fortunately. As I type this, I don’t believe it will with this technology.

But still, if you haven’t gasped while talking to a Chatbot in 2025, then, well…okay…

Perhaps if handed a Star Wars droid for your personal use, you’d complain that C-3PO sounds too posh, or that R2-D2 only comes in blue.

OK Computer

That’s not to deny that these chatbots are still – only – incredibly sophisticated prediction-and-illusion machines.

They make errors all the time. They can be bamboozled by simple prompts. While tech CEOs gush about replacing rooms full of PhDs, I still wouldn’t trust a chatbot to book me a bus ticket.

It’s been a rollercoaster ride. A couple of years ago, the sheer, sudden amazement at their output made it easy to believe some kind of underlying logic – even intelligence – was emerging inside these models.

But familiarity has rapidly bred a sort of contempt.

When watching the earliest cinema reels, audiences would duck or shudder as a train sped towards them. We don’t do that now – and similarly we’re already blasé about chatting to ChatGPT about nuclear physics and feeling like undergraduates.

As for business applications, we’ve seen reports suggesting AI is behind the dearth of graduate jobs, and others finding no efficiency gains – or even that using AI increases workloads.

Parsing these highs and lows, where is the technology ultimately headed?

Is AI going to flood the world with generative slop – while killing the Internet as we know it as a side-hustle, by giving 99% of people 99% of the answers they need without ever visiting the underlying websites? (Like nearly all sites, Monevator continues to lose traffic. Please consider shifting to email and becoming a member.)

Will AI replace at least rote jobs like customer support and copy editing? Or is it going after six-figure lawyers and computer programmers?

Or are we just a few updates away from a digital Stephen Hawking that rapidly improves itself before unplugging its concerns from humanity’s meaty matters?

Capital punishment

All of that would be more than enough speculation for investors concerned with companies in-line for AI disruption. (Conceivably: all of them.)

But then we must layer on the hundreds of billions of dollars of capital expenditures being pumped annually into all this by a handful of listed behemoths.

A tiny cohort of firms that could now account for the value of 20-25% of your pension.

You need to be a post-singularity AI to get your head around the 5D chess unfolding.

Or, of course, you could shrug and say who knows and continue to passively invest. It has long been a winning strategy for that reason, among many others.

Paranoid android

For my part, I’ve spent the past 18 months playing cat-and-mouse with the AI question.

I’m astonished by the quality of AI output – and at the same time by what’s claimed for it, given the entry-level errors it still commits. And I’m mildly terrified by the sums being wagered on what AI might do tomorrow.

Even lopping off the tails – the chance that AI turns out to be a dud like the metaverse, or that it reduces us all to ants by 2030 – doesn’t help much. The range of possible outcomes (personal, societal, economic) remains beyond any reasonable computation.

The result?

I’m Mark Carney’s unreliable boyfriend, in the guise of a naughty active investor. I’ve bought AI stocks one week when they’ve swooned, only to sell them too soon. I’ve eked out broadly in-line returns for the year despite, at times, having no exposure to the biggest US tech firms and being massively underweight US shares throughout.

Some of this sturm und drang has bled into Monevator articles. I hope we’ve been even-handed, and haven’t appeared to bang the table in declaring the market a bubble.

Because I’m not sure about that. But I am certain this isn’t business as usual.

Of course, getting calls right or wrong comes with the territory of active investing. Not so long ago I was relieved to have sidestepped my Amazon shares pretty much halving in the 2022 rout. Yet I’m also on record as having effectively lost a life-changing sum (for me) by selling my Tesla shares at precisely the wrong time, after nearly a decade of holding on.

So it goes with stock picking. What’s different about this latest AI boom is that it feels monumental and all-encompassing.

This isn’t about missing out on this company, or losing money on that disappointment. The fear around getting it right or wrong feels more existential.

The only other time I can recall feeling this way was 1999. I wasn’t an investor then, but that didn’t matter – because I’d started to fear for my economic future if I didn’t get my twenty-something self onto a dotcom bandwagon pronto. It really felt like the last train was leaving the station.

Well, we know how that ended. But I’m not a total idiot – and yet I still vividly remember feeling that way.

This is what manias are like, in the moment. If you truly have perspective while they’re happening, then perhaps you’re too far removed from the action.

Time is the only real perspective. Well, that and already knowing the final scores.

If I’ve had a recurring theme on this blog over the past two decades, it’s that things do change. To pick a germane example, I recall making the case in 2015 that even passive investors should consider buying an explicit dollop of technology shares.

From our vantage point in 2025, it’s hard to imagine that ever needed saying.

I wonder what we’ll think in 2035.

Are friends electric?

Back to the here, now, and next week, I can’t see why we won’t be continuing to fret over our allocations – or otherwise – to AI-related companies in 2026.

Not when the Magnificent 7 represents a fifth or more of global tracker funds. Not to mention all the other companies adding to the AI pile-on.

Even a big bust won’t help. It’d only leave us wondering whether to buy the dip.

Or perhaps AI will begin to make commercial inroads that make today’s firms seem a steal, after all? Even as they plough all that money into silicon that withers on the vine.

Incidentally, to keep track of the unfolding AI story you could do a lot worse than to follow the comment thread on a Monevator post about AI from May 2024. There you’ll find reader @DeltaHedge has been collating more links then you could shake an LLM at. It’ll make an interesting resource when (if…) the dust settles.

But I’ll end with an anecdote that I expect to think more about in the months ahead.

A close family member was in hospital this week for a serious but routine operation.

It appeared to go well. But later in recovery she developed complications. Cue another trip back to theatre and another general anaesthetic, as well as a few generous helpings of other people’s blood squeezed into her reluctant veins.

Fortunately – touchwood – the staff appear to have caught the problem in time.

But that isn’t the point to this story. Rather, it was what I found myself doing in the midst of it unfolding.

Someone knowledgeable was updating me from the hospital throughout. They were kind in finding the time to do so.

However in-between their messages, I ran what I knew through my favourite chatbot, and asked it any questions that came up.

The AI was calm, level-headed, reassuring, and apparently realistic. There were no discrepancies with what it told me and what was apparently happening on the ground.

What does it mean that in this stressful hour I turned to an LLM for understanding – and perhaps even comfort? To a technology that didn’t even exist five years ago?

Well, obviously it means we’re living in late 2025, going on 2026.

But it also suggests to me that this story may have barely started. And that perhaps I don’t have enough AI exposure, after all.

End-of-year housekeeping

I’ll be back with a shorter-than usual Weekend Reading on the 27 December. Then we’ll see you all on 3 January 2026.

Merry Christmas everyone!

P.S. There’s just time to announce the winners of the Monevator Christmas sweater competition. Pulled from the metaphorical hat from among the new membership sign-ups was Amanda R., while Mark C. was the lucky draw among the investing advice givers. Nobody referred any new sign-ups, though, so the third goes unclaimed. Here’s a new incentive: the first member on an annual plan who refers someone who signs up on the same terms will get a free Monevator hoodie. These are actually pretty cool (I’m wearing one right now). A previous post explains how referrals work. Remember you can earn a lifetime membership discount through referrals, too.

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Growing up, I was often told that paying off your mortgage was the best financial decision you could make.

A funny lecture to give an eight-year-old, granted. But the thought got stuck in my head.

Paying down debt makes for sexy headlines. Santander observed earlier this year that joining in with Dry January – and reallocating all of your booze money to overpaying your mortgage instead – could wipe £28,373 off your mortgage payments over 25 years.

I’m thinking about taking up drinking for Christmas just so that I can join in by quitting again next year!

If you read Monevator though, you’ll know that often the smarter decision is to invest instead.

But what if you’re already investing as much as you want to, and you still find yourself having a few thousand pounds sitting around?  

Sure, you can make overpayments on your mortgage. But often after overpaying the first 10% of your mortgage value you’ll incur penalties.

And what if you suddenly want that money back? Well, then your bank will typically have its fists tightly closed around your cash.

Offset mortgages: the best of both worlds

Offset mortgages are a neat solution. Monevator has covered them in detail before.

To summarise, with an offset mortgage you put your cash into a designated account with your mortgage lender. It then subtracts that cash balance from your total debt balance each month before calculating your interest.

If you’ve got a £250,000 mortgage, say, and £40,000 in cash savings, then you only pay interest on the remaining debt of £210,000.

On paper it’s a fantastic idea. There’s no tax to pay on savings interest, you can make effectively unlimited overpayments, and you can withdraw your cash whenever you need it.

Here’s the catch

With my mortgage coming up for renewal soon – and having heard from so many offset mortgage fans over the years – I investigated to see if our next mortgage should be an offset.

That’s easier said than done, because these days, the offset mortgage sits in a murky and dusty corner of financial services – a relic of years past.  

Perhaps because rates were so low for so many years people forgot about them?

Whatever the cause, I was disappointed to find many lenders don’t offer offsets nowadays, or else restrict them to existing borrowers. So as a prospective offsetter, you might struggle to find a suitable lender.

Barclays (as of 16 December) offers a mere two offset mortgage options on residential purchases, compared to 28 products without offset functionality.

Yorkshire Building Society (YBS) (as of 17 December) similarly offers two – from a total mortgage range of 11.

So even for the few lenders that offer them, offsets are a niche product.

Mortgage maths

Regardless, let’s compare some of the options available (as of December) for customers with a 75% loan to value (LTV)1:

Lender	Product	Initial Rate	Fee
Barclays	Offset 2 Year Tracker	5.22%	£1,749
Barclays	Standard 2 Year Tracker	4.21%	£999
YBS	Offset 2 Year Fixed	4.09%	£995
YBS	Standard 2 Year Fixed	3.69%	£995

With Barclays you’re paying a 1.01% higher rate for the luxury of having an offset. And you can slap a £1,749 fee on top of that – a full £750 higher than with the standard tracker.

Why it should cost more? Who knows? Perhaps the bank has to share the data between the savings and mortgage teams via specially-trained carrier pigeon.

With Yorkshire Building Society, things are a bit better. It only wants 0.4% extra on the mortgage rate.

Higher rates and fees can destroy the benefits of offset mortgages

Now we’ll put some real numbers on these scenarios.

Let’s say Peter wants to borrow £400,000 over 30 years.

It’s worth bearing in mind that just because Peter likes the look of the YBS products, that doesn’t mean it will agree to lend against his property.

Hence we’ll imagine one scenario where he can only get a mortgage with YBS, and one where he can only go with Barclays:

Product		Initial Monthly Payment	Capital paid off after 2 years	Interest costs over 2 years + fee	Total cost over 2 years
Barclays – Offset 2 Year Tracker		£2,202	£12,236	£41,209 + £1,749	£42,958
Barclays – 2 Year Tracker		£1,958	£14,439	£32,563 + £999	£33,562
Barclays – additional cost for offset product					+£9,396
YBS – Offset 2 Year Fixed		£1,931	£14,719	£31,612 + £995	£32,607
YBS – 2 Year Fixed		£1,833	£15,547	£28,451 + £995	£29,446
YBS – additional cost for offset product					+£3,161

With Barclays, Peter would cost himself a whacking additional £9,396 for the luxury of having an offset mortgage.

With YBS, he incurs an extra cost of £3,161.

Show me the money

Okay, that’s the bad news out of the way. Time to unleash Peter’s savings to start raking in those offsetting benefits, right?

We’ll assume Peter is a 40% taxpayer (offsets would look a smidge better if he was a 45% taxpayer and a lot worse if he was only paying 20%), that he’s already used his £500 tax-free savings allowance, and that he has no ISA space remaining.

The offsetting benefits with an offset mortgage obviously depend on how much Peter actually has in savings.

So let’s look at four possible scenarios. (All the numbers are annual):

Lender	Savings Amount	4.5% Savings Account (after 40% tax)	Offset (interest saved)	Surplus vs Savings	Surplus after additional interest and fees
Barclays	£25,000	£675	£1,305	£630	-£8,766
	£50,000	£1,350	£2,610	£1,260	-£8,136
	£100,000	£2,700	£5,220	£2,520	-£6,876
	£200,000	£5,400	£10,440	£5,040	-£4,356
YBS	£25,000	£675	£1,100	£425	-£2,736
	£50,000	£1,350	£2,200	£850	-£2,311
	£100,000	£2,700	£4,400	£1,700	-£1,461
	£200,000	£5,400	£8,800	£3,400	+£239

Ouch!

Okay, considering the savings income alone – achieved because the interest reduction from using an offset is not liable for income tax – Peter is indeed significantly better off with an offset, compared to keeping the cash in a taxable savings account.

But the higher rates and fees that also come with the offsets quickly undo the gains.

With the Barclays mortgage costing an extra £9,396 in interest and fees, even if Peter had £200,000 to offset, he would still be better off on a standard tracker with his cash in a savings account.

I don’t doubt many people out there have plenty of cash. But it must be a vanishingly small proportion who want to have cash savings on hand equivalent to half their mortgage value.

With YBS, only when allocating £200,000 in cash against the offset does it start to make sense. But Peter still only benefits by £239 after all the extra costs of the offset option.

For my part, I wouldn’t tie up £200,000 in an offset mortgage for such mean gruel.

Also bear in mind that in any of these scenarios, Peter could presumably just have borrowed less in the first place and put the spare cash into his deposit.

What is your goal with an offset?

It’s easy to fall into a trap of making decisions because they feel good, rather than because they make financial sense.

When people talk about how offset mortgages have enabled them to get out of debt faster by saving thousands in interest payments… well, it all sounds very enticing.

Perhaps that was your experience. But given today’s rates, an offsetter is probably worse off than if they were on the vanilla option of stashing their cash in a savings account, or simply maxing out overpayments on a standard mortgage.

True, there are a few scenarios where offsets might still make sense.

Perhaps you want to hold large amounts of cash whilst you wait for the right buy-to-let opportunity to come up? Or maybe you get large bonuses every so often but you need to keep large amounts of cash on hand for school fees? Or for getting the yacht serviced?

The frustration for me is that offsets could be a really valuable product, especially with tax on savings the latest target of the Chancellor. 

The government plans for tax on savings income to rise to 2% above the respective income tax bands for 2027 to 2028. Who knows if further increases will follow.

So offset mortgages seem appealing for higher-tax rate taxpayers with cash to spare.

There’s also a lot to be said for having the flexibility to just drop extra cash into the offset when you have it, and pulling it back out when you need it.

But as of today, their uncompetitive interest rates and fees make them unattractive for most.

Your mortgage mileage may vary

As is probably obvious by now, I love the concept of offset mortgages.

But unfortunately the numbers don’t work for me.

Even if I had 50% of my mortgage balance available in cash, I still wouldn’t take out a product that only makes financial sense if I retain that cash balance for the whole duration of a two-year mortgage term.

If you need really do need to have lots of cash on hand – just in case, for some reason – then an offset may be worth considering.

Perhaps better rates will be available by the time you come to remortgage, too.

But as of right now, for most people I just don’t see a case for paying more to offset.

On the same note, if you already have an offset mortgage, then run the numbers to see if you’re actually benefiting as much as you think you are. You may well find that with a standard – cheaper – mortgage product and your cash held in a competitive high-interest savings account, you’d be better off overall.

Even if it does mean sacrificing your beloved offset!

1. LTV / Loan to Value is the value of the mortgage (i.e. the loan) divided by the value of the property [↩]