Mortgage Rate Rises

I've just had my annual mortgage statement through...

We are on a repayment mortgage but looking at the statement we are paying £700 a month in interest alone!! I guess I knew this but its only when you see it on the statement do you think :eek::eek:

I've just been on the martin lewis website looking at overpayments etc. I've currently got a fair bit of money tied up in various savings bits etc which mature at the end of this year.

I have got a credit card which is 0% for money transfers (2.9% fee) for 15 months. If I was to do say a £5000 money transfer and pay that off my mortgage (fee £145) would I be making much of a saving on such a small overpayment?

The part of the mortgage I want to pay is currently £173k but the interest rate is quite high at 3.49%

Apologies if its quite a complex question - I can't quite work out if its worth doing - according to money supermarket I'd say £5k in interest over the term of my mortgage but not sure if thats right??
 
DJMK4 said:
is there any other lenders doing a 3.99% rate at the moment with a decreasing ERC?
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HSBC 5 year fix at 3.94%, £999 product fee via moneysupermarket.com. ERC starting at 5% and decreasing 1% a year.

ETA: If you can pass their stricter requirements, First Direct 3.99% with £490 product fee. ERC 3% for months 1-12 and 2% for months 13-60.
 
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EvilRob said:
HSBC 5 year fix at 3.94%, £999 product fee via moneysupermarket.com. ERC starting at 5% and decreasing 1% a year.

ETA: If you can pass their stricter requirements, First Direct 3.99% with £490 product fee. ERC 3% for months 1-12 and 2% for months 13-60.
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There is no point putting a product fee on to the mortgage. I'd end up paying about £5 less per month than no product fee . The one I'm looking with no product fee has £500 cashback so it ofsets the difference in %

Ta I'll check out first direct
 
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apple_man77 said:
I have got a credit card which is 0% for money transfers (2.9% fee) for 15 months. If I was to do say a £5000 money transfer and pay that off my mortgage (fee £145) would I be making much of a saving on such a small overpayment
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You will always benefit by paying off your mortgage sooner. £5k isn't huge amount, that's approx 3 percent of what you've got left, if I've read it correctly.

usually you're allowed up to 10 percent fee free, so 17k per year in your case, but you've mentioned a £145 fee so perhaps yours is different.

Paying off as much as you can early will help, however, £5k is also useful else where, can be turned into other things, needed for emergencies.

If you have it totally spare then great, pay it off. I'd advise against putting things on credit cards etc.
 
unwashed potato! said:
You will always benefit by paying off your mortgage sooner. £5k isn't huge amount, that's approx 3 percent of what you've got left, if I've read it correctly.

usually you're allowed up to 10 percent fee free, so 17k per year in your case, but you've mentioned a £145 fee so perhaps yours is different.

Paying off as much as you can early will help, however, £5k is also useful else where, can be turned into other things, needed for emergencies.

If you have it totally spare then great, pay it off. I'd advise against putting things on credit cards etc.
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I’d agree with the advice not to be paying off you mortgage with a credit card just use what ever money you’d be using to pay off the credit card to over pay your mortgage. If you use an online calculator you can see how even very small regular over payments can make a big difference over the life of a mortgage.
 
unwashed potato! said:
You will always benefit by paying off your mortgage sooner. £5k isn't huge amount, that's approx 3 percent of what you've got left, if I've read it correctly.

usually you're allowed up to 10 percent fee free, so 17k per year in your case, but you've mentioned a £145 fee so perhaps yours is different.

Paying off as much as you can early will help, however, £5k is also useful else where, can be turned into other things, needed for emergencies.

If you have it totally spare then great, pay it off. I'd advise against putting things on credit cards etc.
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145 is the money transfer fee from CC.
 
That’s correct…so it’s cost me £145 to do the money transfer then the £5k is 0% for 15 months (which will be paid off) so I can pay a £5k over payment on my mortgage which sits at 3.49% so hopefully it’ll save me a few quid…

Just can’t work out how much!!
 
apple_man77 said:
That’s correct…so it’s cost me £145 to do the money transfer then the £5k is 0% for 15 months (which will be paid off) so I can pay a £5k over payment on my mortgage which sits at 3.49% so hopefully it’ll save me a few quid…

Just can’t work out how much!!
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By my calculation you'd save about £246 over the 15 months.

- Amortizing £5,000 at 3.49% for 15 months (keeps the comparison simple!) you'd pay £5,391.
- The basic CC money transfer of £5,000 and it's fee of 2.9% so a total of £5,145.
- Deduct the two for the saving.

Just be careful using the card for purchases as well if doing this; you will have to calculate the amount above the minimum payment required if you want to avoid interest on purchases - the credit card company will not do this for you.
 
Thanks mate, not as much as I thought / hoped :( but better than nothing I guess.

Thank you - I won't be using it for anything else - it was coming to the end of a promotional period so I was thinking of closing it and then they offered me 0% for 15 months on balance transfers and money advances and so I thought about doing this.

I've recently stuck a load of money in premium bonds (as I keep hearing good things about them) and had a very good return last month so would like to keep them rolling for now and then jumped on a couple of the high interest savings accounts (First direct at 7% etc) at the start of the year but they need to sit there for 12 months for the full return before I want to touch them.

Our mortgage is in 2 parts from when we moved house 3 years ago...

On the part I'm chipping away at it says we paid...

£11391 - which equates to £6126 being paid off that part of the mortgage (the rest is interest) so this £5000 will hopefully equate to around 10 months of extra payments hopefully (if that makes sense)
 
The easiest thing to do is list everything in order of interest rate. Loans (inc mortgage) credit cards, savings rates.
Assuming you have not had your interest allowance removed due to excessive income, and that your not exceeding that allowance with earned interest (if so you need to reduce effective rates of interest bearing savings) then :

You work your way down from the highest to lowest. Any debts that sit above interest rates you should look to clear, from the lowest interest earning accounts. Any interest rates that sit above debts you look to maximise.
If you can move all your interest earning above you highest debt rate then thats the best position.
Its easier said than done, but at least right now there are chances you can. Ideally all your interest earning money sits above the loans in your list.

With one small "clause", ensure you have enough liquid assets to pay off any debts as they fall due, and you have a nest egg for emergencies. Best to consider 6 months bills for that as a good safeguard.
 
apple_man77 said:
Thanks mate, not as much as I thought / hoped :( but better than nothing I guess.
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You're welcome. That amount is really the minimum you could save as technically the £5k being paid in to the mortgage means it's true duration is the length said mortgage. I didn't have the info for how long remains in the mortgage and what the interest rates of that period would be (crystal ball!) so it can get complicated. Worth noting is that you'll still be paying the same monthly mortgage amount as well as the minimum payment to the CC, the only thing that will change is the length of the mortgage (savings in interest aside).

Mercenary Keyboard Warrior said:
The easiest thing to do is list everything in order of interest rate. Loans (inc mortgage) credit cards, savings rates.
Assuming you have not had your interest allowance removed due to excessive income, and that your not exceeding that allowance with earned interest (if so you need to reduce effective rates of interest bearing savings) then :

You work your way down from the highest to lowest. Any debts that sit above interest rates you should look to clear, from the lowest interest earning accounts. Any interest rates that sit above debts you look to maximise.
If you can move all your interest earning above you highest debt rate then thats the best position.
Its easier said than done, but at least right now there are chances you can. Ideally all your interest earning money sits above the loans in your list.

With one small "clause", ensure you have enough liquid assets to pay off any debts as they fall due, and you have a nest egg for emergencies. Best to consider 6 months bills for that as a good safeguard.
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Good advice and I'd also add when listing debts to work out how much cash you're actually paying out in interest and order it that way too if it makes a difference, not just the rate.

For example, if you have borrowed £500 at 2% and £2,000 at 0.5%, you will be paying more interest on the latter so will want to reduce that one first.
 
Mysterae_ said:
Good advice and I'd also add when listing debts to work out how much cash you're actually paying out in interest and order it that way too if it makes a difference, not just the rate.

For example, if you have borrowed £500 at 2% and £2,000 at 0.5%, you will be paying more interest on the latter so will want to reduce that one first.
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I'd argue that's not true, the £500 charges you more interest per £ than the £2000 does.

I'd clear the £500 first in that scenario.
 
Yes you only list it in interest rate order as your trying to min max it in effect. You should not care about the size of savings or debts particularly.
But the point is to strategize the clearing of debt or maximising of interest.

Eg you may have a high paying savings account thats max ceilinged (eg £5k) or monthly so you cannot simply (always) just have one savings account.
 
HungryHippos said:
If we're talking same duration, I think my assessment is correct. If the interest paid is the same on both sums, then the 1st one is an even better option because it only takes £500 to eradicate it, vs £2000 on the 2nd one.
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Yes.

The way to think about it is that you will have a fixed amount of income. It wont be fixed but you don't know what that number is ultimately. Paying interest is reducing the amount you will have spare after you repay the capital you borrowed.
Out of that fixed income you need to repay every loan, including all the capital.

Each loan will have a total amount payable, which is a function of capital, interest rate, and time (plus potentially fees)

Your ideal is, ignoring timing as much as you can, to maximise the position where :
Total amount payable - interest received = win!
So whatever the term length, clearing the highest rates of debt first will give you a higher win! value than clearing lower first.

Normally, interest rates paid on debt exceed interest rates receivable on capital and as such the most beneficial position is achieved by paying off debt as fast as possible.
IF savings interest rates (after tax if applicable) exceeds debt interest then you should maximise the interest on savings and keep debt repayments to the minimum. Until the point that reverses when you should immediately pay of as much debt as you can that is a higher rate that the interest rate you receive.

As said before you should always keep a buffer for unexpected. And you will never get this equation to be perfect over your lifetime. If something is exceptional at one point in time then take advantage of if (low interest on debts, high savings rates etc) but be ready to flip your approach when that situation goes away.

I have deliberately excluded investing here. Its a different equation since your returns will likely over time be higher than debt interest, unless its credit card interest. But youare also introducing risk of capital loss, returns being lower than you expect or even having to crystalize a loss due to timing, eg needing to pay off an interest free credit card.
So you need to balance the risk here against crystalizing a known position.
 
Yep I keep 3-6 months in the old current account so it's liquid, just in case :)

I dislike owing money so I'd only take out long term finance on really expensive stuff, and hopefully keep as much of that on 0% as possible.

For things like mobile phones I'll just buy them SIMO, same for contracts for various things, if they want a monthly bill it's usually more expensive than just buying outright. All Insurance + Tax options paid upfront for the full duration also saves a bit as most things like car tax and car insurance charge more for monthly options.

I see interest on debt as a negative modifier that should be avoided, have never paid interest on CC balance for example, I always put it off in full each month automatically via DD.
 
The best way is overpayments, if you can overpay by around 10-20% PM you can take years off the Mortgage

its also less of a hit than a lump sum you might just need for an emergency one day.
 
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bris said:
The best way is overpayments, if you can overpay by around 10-20% PM you can take years off the Mortgage

its also less of a hit than a lump sum you might just need for an emergency one day.
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Yeah I think in reality whilst a one off 5k hit sounds like a good idea, overpaying in a more sustainable way is the right answer. I believe you can ask for overpayments back in a 12 months period too, if it was to ever hit the fan.
 
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