Mortgage Rate Rises

Do these sums look correct?


New idea! (10 year term)New idea July 23 (10 year term)
10 year term nationwide10 year term nationwide
5 year fixed - 4.34%5 year fixed - 5.59%
Cost of deal £17,441Cost of deal £22,725
£1028 / month£1089 / month
£1028*60 = £61,680£1089*60 = £65,340
£61,680 - £17,441 (interest) = £44,239£65,340 - £22,725 (interest) = £42,615
£100,000 - £44,239 = £55,760£100,000 - £42,615 = £57,385
Overpay £800/month = £48,000Overpay £800/month = £48,000
£7760 left after 5 years£9385 left after 5 years
 
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Kind of lucky I fixed 6 months ago before my mortgage deal ended. Only a £200 increase on a 2 year deal but now I wish I had fixed for 5 years :mad:
 
Although it’s quite technical if you’re not an accountant, I found this recent paper interesting in the wider discussion of interest rates, inflation, and government spending.


We like to think of the economy as this external thing, mostly mathematically driven but it’s far from it. Sheer political will and confidence of many people could change the current situation overnight.

I’m worrying now we didn’t fix for long enough when we remortgaged back in Dec 22 for 3 years. Hopefully we’ll have mostly paid it off by then though.
 
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413x said:
So are we saying the same thing?
Put it in the highest interst account?

Because if your mortgage rate is 6, and savings is 5. Obviously you'd over pay the mortgage at that time.

But soon as savings rates are above your mortgage rate it's time to Divert that overpay to the savings account.

Real world case:
(not predicting the future)
-You have a mortgage at 4pc for 5 years

-You savings were 2pc. So you overpaid the mortgage

-Bank rate goes up

-Flexible saver comes out at 5pc fixed for a year

-At this point (to max profit) you'd switch to the saver and stop over paying the mortgage.
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Only if the mortgaged sum was similar to your savings. 5% of naff all is much less than 4% of 200k.

Figures for illustration only.

My philosophy was always pay off the mortgage. Even in the bad old days when Abbey National only calculated interest owed once in a year. The less money you owe, the more options you have.
 
Hagar said:
My philosophy was always pay off the mortgage. Even in the bad old days when Abbey National only calculated interest owed once in a year. The less money you owe, the more options you have.
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I have a friend who is convinced that living in perpetual debt is a good idea, as waiting to buy stuff means it costs more due to inflation etc.

I like to have less stress not more, so will often save up to buy things ahead of actually buying them, in his case if he lost his job he'd have zero lines of credit to turn to short term, and debts that need paying.
 
Hagar said:
Only if the mortgaged sum was similar to your savings. 5% of naff all is much less than 4% of 200k.

Figures for illustration only.

My philosophy was always pay off the mortgage. Even in the bad old days when Abbey National only calculated interest owed once in a year. The less money you owe, the more options you have.
Click to expand...

It doesn't matter how much though.
4k in a 5pc saver is better than paying off 4k of a 200k mortgage at 2pc

Its always better against the higher interest pot
 
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Hagar said:
Only if the mortgaged sum was similar to your savings. 5% of naff all is much less than 4% of 200k.

Figures for illustration only.
Click to expand...
Mortgaged sum is irrelevant. All that matters is the amount you’d overpay or save and the respective % interest.

You’re not saving 4% on 200k by overpaying, only on however much you overpay.

There is a psychological cost for sure to being indebted, but the decision to overpay or not is really that simple in most cases.
 
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413x said:
It doesn't matter how much though.
4k in a 5pc saver is better than paying off 4k of a 200k mortgage at 2pc

Its always better against the higher interest pot
Click to expand...

No because you will probably blow that gain in savings. Human nature being what it is. It is aways better over the long term to pay down debt. People on historically low interest loans had they used the rate to overpay an extra 1% -would be in a better position than they are currently with remortgaging today.
 
413x said:
It doesn't matter how much though.
4k in a 5pc saver is better than paying off 4k of a 200k mortgage at 2pc

Its always better against the higher interest pot
Click to expand...

Headache of adding a savings account, they often tie you in for a period of time etc, I generally just prefer to overpay the mortgage, even if the rate isn't quite as good.

With overpaying I can opt in or out without any conditions, so it can be more flexible than tying up capital in a savings account.

Negative of overpaying mortgage is you can't really get the money back out again should you need it.
 
HungryHippos said:
With overpaying I can opt in or out without any conditions, so it can be more flexible than tying up capital in a savings account.

Negative of overpaying mortgage is you can't really get the money back out again should you need it.
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These two statements are quite contradictory…

And you can open savings accounts pretty easily these days, even with a new bank. I’ve got 4% instant access with Coventry BS - took me five minutes.
 
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MichaelAwkward said:
These two statements are quite contradictory…

And you can open savings accounts pretty easily these days, even with a new bank. I’ve got 4% instant access with Coventry BS - took me five minutes.
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I am aware they are a little contradictory, but they do differ a little in how they work.

Ultimately interest on a few k at 5% isn't that amazing anyway, so I just pay down the mortgage instead.

Edit - looked into what my bank (HSBC) offers in more detail below.

They are offering a regular saver account which is 5% AER, but the stipulation is you have to pay in £25 - £250 per month. At the max they suggested that incrementally tying up £250 per month for the full 12 months resulted in about £80 bonus interest paid. It's better than nothing but because the balance grows each month, it's sort of equivalent of 5% AER at half the total balance due to month 1 only having £250 in and month 12 having £3000.

They do offer a HSBC Online Bonus Saver now which appears to be better as it looks like you can just outright start with any balance you want. In that illustration, starting with £1000 and not touching it for 12 months resulted in £40 bonus interest, to compare with the regular saver it means tying up £2k immediately is as good as the £250/month £3k total commit of the regular saver. Additionally it does say you can make a withdrawal if you need to but it cuts the interest rate for the month.

This Online bonus saver appears to be relatively new and is more interesting (pun intended) as I can put cash into it and it calculates interest daily, and I am able to take it back out again should I need it. I may investigate opening one of these alongside overpaying. I have funds set aside awaiting a new garden renovation of some kind so could gain some interest on it whilst I add to savings. Even if I need most/all of it, this is better than nothing and not time constrained or value constrained.

Edit 2 - Opened this one up https://www.hsbc.co.uk/savings/products/online-bonus-saver/ and I sent the cash I was saving over to it, so thanks for the reminder :)

Last I checked the savings accounts with my bank were pretty terrible, but this seems pretty good, and is a lot better than the cash earning basically 0% in my current account.

I will still probably do both, add some into this, add some into overpaying, I aim to overpay £500/pcm (mortgage is about £500 as well so total of £1000/pcm) but earn alright cash with relatively low expenses, so I could usually save another £500/pcm at least, if not more.
 
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DJMK4 said:
BBC reporting mortgages will cost around an extra £500 per month by the end of 2026


If that's true then I would expect if it's to come down from then it would be slowly?

They really do like shafting people and stringing things out don't they
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Don’t just like it, they love it.
 
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I think people have been suicidal with mortgages. But then, when I bought my first house, the mortgage rate was 12%. I guess that warned me of the way things can be. The past X years of very low rates lulled people in to a false sense of security. The very same 12% motivated me to pay off my mortgage ASAP and be done with loans for a house. Smug? Yes. People didn't see the writing on the wall.
 
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