Soldato
Are your services international kidnapping?
Mortgage Rate Rises
- Thread starter glenimp617
- Start date
Are your services international kidnapping?
Didn't think those had been around for 10 years or so. Once you start paying BT fees it just becomes a debt like any other.
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Definitely were around in covid times
Soldato
Most trackers don’t have penalties for early exits… might be worth finding one for as long as possible.
I know that when my mortgage deals runs out I default to its tracker, unless or until I remortgage with another fixed term.
Soldato
Usually defaults to SVR which is not the same as the tracker deals, often a lot more expensive.
Trackers on Nationwide used to have no exit fee, I was on one once. Not all have no exit fees.
I'd be tempted to do a reasonable 2 year fix instead of a tracker as I think trackers lately are natively higher rates than fixes, and therefore you'd need 2-3 drops before the tracker would beat a decent fixed rate.
Have to run your own figures though and look at the options.
Trackers on Nationwide used to have no exit fee, I was on one once. Not all have no exit fees.
I'd be tempted to do a reasonable 2 year fix instead of a tracker as I think trackers lately are natively higher rates than fixes, and therefore you'd need 2-3 drops before the tracker would beat a decent fixed rate.
Have to run your own figures though and look at the options.
Soldato
That's great if your mortgage is only charging you 1%... as risk free returns are around 5% at the moment.
The issue that I and many of us have is that our mortgages are charging 4%+ and with the current rate of return for risk free returns around 5% it's a gamble as the mortgage rates may even be higher when it comes time to renew.
Anything less or around that 3% mortgage rates is the cut off for me, I would rather put my money or at least some of it towards overpayments for that guarantee return of whatever the mortgage rate is.
Soldato
Most mortgages after the fixed rate period default to the banks standard variable rate which is usually absolutely awful and in reality is another one of those scams to make money out of people. If you take a two year tracker it will be well below the banks standard variable and tied to either that or the Bank of England base rate so will move up and down in line with it. Being on your banks base rate for any length of time is likely to cost you a stupid sum of money in comparison to a fixed or tracker rate.
Soldato
Mine runs out next January and i'm thinking of doing the same currently.
Soldato
Yes I wouldn't do this if my mortgage rate was say 4%, it's the large delta currently that is making it good by letting me borrow against myself at 1%. I'll revert to normal and even overpay some when my deal ends for sure.
Personally I don't think I'll overpay mine as it's pretty much locked away. I'd rather overpay into pension due to tax relief
I know pension is obviously locked away. But you're getting 40pc relief on it. That's a lot more than 5pc on an isa or a mortgage rate
I know pension is obviously locked away. But you're getting 40pc relief on it. That's a lot more than 5pc on an isa or a mortgage rate
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Soldato
I understand the theory and cannot fault it, and I do have an employer pension that I do whatever it works best at, I wana say 3%/6% contribution I'm not certain without checking.
But I'm not sure I'd over pay into a pension at this stage, mainly because I don't trust them. I don't trust this government, and given potential world events.
I appreciate you never know what could happen, all the banks could get hacked and reset to zero, but of all of them a pension provider is the one if trust the least.
If I had spare money, enough to do it, if buy property/land or other assets that appreciate onto a limited company, even gold and bury it, before overpaying into a pension.
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You do save the 5% every year and the 40% only once, but should be outperformed by investment growth.
Yeah it would have to be a pretty bad investment vehicle to not achieve 5pc year in year anyway.
It'll probably beat it on "average".
So you're getting 5pc on 40pc more.
Well. That's my theory anyway.
Our mortgage is 900ppm and it's quite manageable. Excess funds beyond living and holidays etc imo are better in pension.
Also helps if have a relationship breakdown.
We have our own share of the house and if I overpaid it would get messy should we break up.
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Pension Sharing Orders are a thing
Soldato
Should definitely overpay into pension more if you're a higher earner, that tax relief is incredibly good. Will be unbeatable long term.
Pension is also the best tool for earning the wealth you would want to draw down later on, sure it's locked away to some degree but it's somewhere to go into more once you have short/medium term cash saved up.
Pension is also the best tool for earning the wealth you would want to draw down later on, sure it's locked away to some degree but it's somewhere to go into more once you have short/medium term cash saved up.
- Emergency Cash for X months of living (6 months min is a good point).
- Stocks ISA for short/medium term if you need more cash than usual for something.
- Rest may as well go into Mortgage or Pension. I'm hoping to do both personally!
That's where I'm at
There's enough in my isa vs pension now. And although I'll still contribute it's time to swing towards the pension. Something should have been doing earlier really.
Could live 2 years on easy access (inc isa) paying mortgage etc easily. Obviously no one wants that.
Watched a few vids and pretty much pension is easy and in vast majority of cases best overall.
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Soldato
Its a complicated scenario and there is no right answer.
Pensions because they are locked away mean they fall outside whats taken into account if you need to claim benefits, where as ISAs and other "liquid" assets you should declare.
40% tax relief is not a 40% gain, its a 67% gain. If you were paid £100 and lose £40 to tax you end up with £60 in your hand. If you put £100 into a pension its 40/60 higher, = 67% higher for whats in the pension.
Basic tax payers is 25% extra, 20/80
Pensions because they are locked away mean they fall outside whats taken into account if you need to claim benefits, where as ISAs and other "liquid" assets you should declare.
40% tax relief is not a 40% gain, its a 67% gain. If you were paid £100 and lose £40 to tax you end up with £60 in your hand. If you put £100 into a pension its 40/60 higher, = 67% higher for whats in the pension.
Basic tax payers is 25% extra, 20/80
Oofft. Easy to miss that!
Soldato
I know with overpaying the mortgage that maths wise it might not be worth it and investing the money is more optimal. However I do think there's a mental satisfaction at seeing the mortgage come down as well and finally being paid off.