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Mortgage Rate Rises
- Thread starter glenimp617
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Soldato
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It is, but if you put it in a calculator then you basically gain nothing over 7 years
Soldato
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I don't think I'd bother with maxing savings vs mortgage overpayment when the difference is 4.57% to 5% ish tbh, whilst yes it's better, it does add some extra work 
In my case though, mortgage is 1%, and savings is 5%, this is a no-brainer and is potentially a lot more than £167, so I am maxing the savings.
But as we discussed many times, savings can be a lot more flexible in how you deploy them, mortgage overpayment you can't get back easily and use for anything else.
In my case though, mortgage is 1%, and savings is 5%, this is a no-brainer and is potentially a lot more than £167, so I am maxing the savings.
But as we discussed many times, savings can be a lot more flexible in how you deploy them, mortgage overpayment you can't get back easily and use for anything else.
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32 years, ‘eek’, at least the balance is t too high.
Technically the correct answer is to maximise the best interest rates you can get on either saving or finance. As soon as the highest APR you are paying drops below the savings APR (after tax where applicable), you could switch to savings.
Personally, we save and pay down the mortgage. The temptation to spend the savings when they mature on something other than the mortgage (which is tomorrow’s problem) is high. Paying it off right away guarantees it’s actually paid down early.
If the difference was small, I wouldn’t bother with the savings part either.
Technically the correct answer is to maximise the best interest rates you can get on either saving or finance. As soon as the highest APR you are paying drops below the savings APR (after tax where applicable), you could switch to savings.
Personally, we save and pay down the mortgage. The temptation to spend the savings when they mature on something other than the mortgage (which is tomorrow’s problem) is high. Paying it off right away guarantees it’s actually paid down early.
If the difference was small, I wouldn’t bother with the savings part either.
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There is the "safety" net of savings being accessible should something go really wrong.I don't think I'd bother with maxing savings vs mortgage overpayment when the difference is 4.57% to 5% ish tbh, whilst yes it's better, it does add some extra work
In my case though, mortgage is 1%, and savings is 5%, this is a no-brainer and is potentially a lot more than £167, so I am maxing the savings.
But as we discussed many times, savings can be a lot more flexible in how you deploy them, mortgage overpayment you can't get back easily and use for anything else.
Soldato
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That's one of my reasons for just paying it straight off - we won't spend it.
We've got other savings for a safety net.
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Yes, but it's all based on what the lender thinks will happen with interest rates during the course of the term (which in turn is likely to be based on what the money markets think).
Basically, you pay a premium for a fixed rate if they expect rates to go up. If they expect rates to come down, then you pay a premium for a tracker (incidentally, this is also why you occasionally get fixed rates that are lower even than base rate, because the expectation is that borrowing will get a lot cheaper in future).
If you time it right in terms of predicting the direction of rates and grabbing products before they are removed/adjusted, trackers can be a great deal. I took out a zero fee +0.59% lifetime tracker about 16 years ago (I feel old writing that out!), rates then fell by about 5% and paid off the mortgage before rates rose again.
Soldato
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Yes, I'd do both in this case if you can. Some overpayment, some into savings at a good rate. Regular savers make a much bigger difference here technically.
My Nationwide account is 8% interest, which beats everything else, so I put £200/month there first before I do anything.
Length of mortgage doesn't really matter if you're able to overpay it quicker, I like longer term as it gives more flex, and if you ever lost your job you pay less until you get back on your feet.
My Nationwide account is 8% interest, which beats everything else, so I put £200/month there first before I do anything.
Length of mortgage doesn't really matter if you're able to overpay it quicker, I like longer term as it gives more flex, and if you ever lost your job you pay less until you get back on your feet.
Pay the mortgage with that and then start saving again
#yolo
edit: but like a really lame, square shoe/pocket protector type yolo
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Soldato
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A friend overpays his mortgage knowing he'd be better off financially putting it into a savings account, as soon as the value in the savings account got anywhere near 'holiday in the sun' levels his wife would be bending his ear to spend it.
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Plus of course the uncertainty factor when you start talking 5 year and above fixes.
Its why historically longer fixes have higher rates (and higher ERC) because the impact could be significant over a longer window.
Pics of wife on holiday so I can do the maths?
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I'm just as bad to be fair. Saving is not something I've historically been good at
You’ll be taxed on savings too
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I always find it a bit ironic that we have these detailed threads about optimising finances in terms of mortgages/savings etc but then people are worried about savings burning a hole in their pocket! I mean, to me it's all interconnected as part of the plan, you put money aside in savings categorised for your future mortgage payments and don't spend it, it's a non-issue, so if people are worried about that it makes me wonder how they are so careful in other areas. People might say "aha, but what if something unexpected comes up you need the money for young man, your nerdy saving will fall flat on its face and then you've spent the mortgage money amirite???" but surely that's an even bigger problem if the money has already gone into the mortgage as you'd have less liquidity to deal with the unexpected short term cost before getting things back on track? I just don't get it, it's all about a timing offset that gives you both more money at the end of it and also more short-term flexibility by having cash not yet sunk into the mortgage prematurely.
Of course, where people recognise this as a genuine issue for themselves, I'm not going to criticise, repaying a mortgage is never THAT bad an idea (compared to blowing a huge wedge on luxuries or whatever) even if it is sub-optimal.
By nothing, you mean £347.31 ?
That's saving £200 a month at 5% savings rates vs paying off mortgage each month by £200 using your mortgage rate of 4.52% over a 7 year period.
EDIT: Assumptions made in my example was £1500 a month payment.
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I don't think I'd bother with maxing savings vs mortgage overpayment when the difference is 4.57% to 5% ish tbh, whilst yes it's better, it does add some extra work
In my case though, mortgage is 1%, and savings is 5%, this is a no-brainer and is potentially a lot more than £167, so I am maxing the savings.
But as we discussed many times, savings can be a lot more flexible in how you deploy them, mortgage overpayment you can't get back easily and use for anything else.
Yeah I wouldn't bother either at fractions of a percent.
But at 1+ percent it may be worth it.
At 3+ percent...yeah I'd definitely be in savings and not overpay
Soldato
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How did you calculate that?