Mortgage Rate Rises

Currently we have 75k left on our mortgage and it has 17yrs left on the full term.

I took a gamble 3 years ago at a 7 year fixed term at 2% with no fee. At first I was sceptical if I made the right choice, there were definitely cheaper rates on offer but the 7 years fixed at the monthly repayments was more than affordable.

I have just setup a monthly D/D for £150 overpayment and brings the full term down to 15 years.

Obviously when this fixed term runs out I may not be able to afford the overpayments depending on the mortgage rates, hopefully overpaying puts my LTV in good stead so when it does run out I won't get a shock in repayments.
 
Got mine down to 34k with 4 years left. It's on tracker and currently overpaying double every month, (hopefully paying it off within two years). it just doesn't make any sense to fix it now, just hoping the rates don't go crazy.
 
I'm curious...it is really worth overpaying a low interest rate mortgage as interest rates on savings is higher than the mortgage?

I would have thought that putting the money away would make more sense than overpaying at the moment...
 
tamzzy said:
I'm curious...it is really worth overpaying a low interest rate mortgage as interest rates on savings is higher than the mortgage?

I would have thought that putting the money away would make more sense than overpaying at the moment...
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You're correct. Provided you can be disciplined and can access the savings easily when it comes to remortgaging time.
 
tamzzy said:
I'm curious...it is really worth overpaying a low interest rate mortgage as interest rates on savings is higher than the mortgage?

I would have thought that putting the money away would make more sense than overpaying at the moment...
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What is there to be curious about. You have the raw numbers, see what they equate to.

If the difference is small enough then just pay down the mortgage. If not... Savings.
 
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tamzzy said:
I'm curious...it is really worth overpaying a low interest rate mortgage as interest rates on savings is higher than the mortgage?

I would have thought that putting the money away would make more sense than overpaying at the moment...
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Definitely

Savings rates should soon be 5pc plus for multi year fixes.

My current savings account expires in January. I'll change bank (maybe for that barclays offer) at this point and put it in one of those 5p ones.

Mortgage =1.93 for 5 years
Savings =5.00+ for 3 years


Savings account makes sense
 
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413x said:
Mortgage =1.93 for 5 years
Savings =5.00+ for 3 years


Savings account makes sense
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As we keep going back to this topic, it surely depends on how much is left on your mortgage and how much of a savings pot you already have/or are adding every month. E.g. if you have £100k left on your mortgage but are starting from scratch with the savings pot then it won't help half as much. 5% on a few grand ain't much!

EDIT: I thought I'd try MSE to compare the above numbers with a £100k mortgage remaining for 5 years @ 1.93%. I've probably done this wrong but here goes. Saving £500/month versus overpaying £500/month.

Saving £500/month then overpaying the £30k in a lump sum Nov 2027
Overpaying would save you £3 in interest alone, and mean you pay the debt off in full 0 years & 1 month earlier.

Normally you repay £1,750 per month. If you overpay a lump sum of £30,000, you'd be mortgage free 0 years and 1 month earlier. Your total payment over this period would be £104,987.
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Overpaying £500/month
Overpaying would save you £1,146 in interest alone, and mean you pay the debt off in full 1 year & 1 month earlier.

Normally you repay £1,750 per month. If you regularly overpay £500, you'd be mortgage free 1 year and 1 month earlier. Your total payment over this period would be £103,844.
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So overpaying reduces your term and interest paid. I'm sure I've done that wrong, someone with a bit more time today can correct me.

EDIT: I didn't take into account the interest accrued when saving so I imagine you'd stick your lump sum in earlier no? :o
 
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Scam said:
As we keep going back to this topic, it surely depends on how much is left on your mortgage and how much of a savings pot you already have/or are adding every month. E.g. if you have £100k left on your mortgage but are starting from scratch with the savings pot then it won't help half as much. 5% on a few grand ain't much!

EDIT: I thought I'd try MSE to compare the above numbers with a £100k mortgage remaining for 5 years @ 1.93%. I've probably done this wrong but here goes. Saving £500/month versus overpaying £500/month.

Saving £500/month then overpaying the £30k in a lump sum Nov 2027


Overpaying £500/month


So overpaying reduces your term and interest paid. I'm sure I've done that wrong, someone with a bit more time today can correct me.

EDIT: I didn't take into account the interest accrued when saving :o
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My brain got hurt trying to figure this exact maths out ages ago with Psycho Sonny. I gave up in the end as it relied on locking in a really low interest rate and finding a savings account that was pretty certain to deliver a higher percentage.
 
dLockers said:
My brain got hurt trying to figure this exact maths out ages ago with Psycho Sonny. I gave up in the end as it relied on locking in a really low interest rate and finding a savings account that was pretty certain to deliver a higher percentage.
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Indeed. That's another good reason to not bother and just overpay :p

I just dropped into the savings calculator and at 5%, by putting in £500/month you'd get £33,342.79 after 5 years. So an extra £3.3k. Not really worth it in my opinion.
 
I thought it was quite simple.
The bigger the interest number the better the place to put it.

You're either taking 500 off a mortgage a month so gaining the interest on that

Vs

Acuring the the interest on 500 a month.


The bigger percentage wins.
 
413x said:
I thought it was quite simple.
The bigger the interest number the better the place to put it.

You're either taking 500 off a mortgage a month so gaining the interest on that

Vs

Acuring the the interest on 500 a month.


The bigger percentage wins.
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Yep - simplest and best explanation.

What @Scam has pointed out though, is that 5% is quite a lot (unheard of in recent years on any decent size sum), or involves a lot of risk. That risk is valued at £3.3k over 5 years (rounding error IMO, i.e. not worth the stress - just overpay).
 
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dLockers said:
Yep - simplest and best explanation.

What @Scam has pointed out though, is that 5% is quite a lot (unheard of in recent years on any decent size sum), or involves a lot of risk. That risk is valued at £3.3k over 5 years (rounding error IMO, i.e. not worth the stress - just overpay).
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What is the risk?
For example a fix with a big bank at 5pc?

Or are we talking about different savings products?
 
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dLockers said:
No risk if you can find it. I bet you can't though.
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Not yet!
But I think I'll dive into a fix if it's a regular payer.

Using a nationwide one for my holiday fund. 3pc and you can put in 200 a month. But after Jan it drops to worthless.

Ideally I'd love one where you can put 500 in a month. Im not sure if the barclays one at 5pc is a fix. But it's appealing if it is

Edit. The barclays is variable
 
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dLockers said:
My brain got hurt trying to figure this exact maths out ages ago with Psycho Sonny. I gave up in the end as it relied on locking in a really low interest rate and finding a savings account that was pretty certain to deliver a higher percentage.
Click to expand...

Now there is a name I have not heard in a while. Did he manage to get himself banned?

I wonder who his new account is purplesky? :p :cry: :D
 
There are a few things to consider,
1) relative rates. If mortgage is 2% and savings are 4% then your better of saving and paying down later when the situation reverses.
However you must consider, tax since savings are taxable income, but you have or may have an allowance (depends on your highest tax rate)
Plus bear in mind maximum repayment allowance. (Most of the above on really an issue if higher rate tax payer and sums are significant)

2) Access. Need to understand the ability to use or drawdown or not the amount of overpayments. Just need to understand whats the options. Eg nationwide allow most to be treated as a reserve and to take future payment holidays, but you cant pull the funds back.

3) Change in term or payments. Are you trying to reduce the mortgage to the max or give more headroom in payments. If trying to maximise what you pay down then change term which keeps monthlies the same, but if looking for headroom change payments. (You can still keep your actual payments the same, just your future committed ones are reduced if you keep term the same and reduce payments). Depends on your situation whats likely best.

4) Backup cash. Make sure you have at least 3-6 months outgoings (depending how easy you will find alternate employment) before paying down the mortgage. IE keep some liquidity its far more important than the minor impact of the overpayment.

5) too much savings. Should the worst happen and you need welfare support, too much in savings will stop that or reduce it significantly. So again size of debt and overpayment reserve you build up in savings is important.
 
What’s the consensus on fixing now then?

I can fix one of my sub accounts (72% LBV) for 5 years at 4.84% up from 1.9%… Current fix on this sub account doesn’t actually end until March but I can change early (from now). Wondering if it’s worth it or just see what happens come March.

This is a 24% increase on what I’m paying now….

I wonder if I call them, they’ll let me have that rate to start when my fix on this sub account ends rather than now…
Other sub account isn’t able to be changed until March (fix on that one ends Sept 2023). May be best just to wait and go on the SVR on the one sub account until I can port both over tk a new provider.
 
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