This looks like a bad idea - but the question is what happens to the rate at the expiry of your fixed rate? It is quite possible that at that point (Aug 08) you are at liberty to pay off any sum and by waiting till then you do not need to sacrifice your ISA interest (nor your ISA allowance which you should for prudence's sake use to hold a couple or three months salary for emergencies.

You should start looking at alternative mortgage deals now so you appreciate the range and variety available by the time the crunch comes - don't accept the standard variable rate if you can avoid it as there are much better deals around. I just got a lifetime tracker that is currently at 5.79% so there's little point foregoing the ready cash in a couple of cash ISAs to knock any off that. I was able to transfer with no costs or fees.

Normally I would tell people to reduce any debt they have if possible, however in your case your ISA is tax-free, so is making more money than your mortgage is costing you. This means that you are making a net profit, and should not lose the ISA to pay the mortgage off. Only if the mortgage starts costing you more than you are making on the ISA should you shift the money over, or if the government changes the tax rules and your net profit from the ISA does not beat the cost of your other borrowing. Make sure you prepare your remortgage in good time for August (allow 8 weeks for the application) and that the total cost of the fee plus the interest over the next few years works out lower than the annual total income from the ISA.

Katie Tucker is a product specialist at John Charcol and a Moneywise Ask The Professionals columnist