Base rate cuts helping you become MF?

Redbedhead

Anyone else benefitting from the base rate cuts in their quest to be MF? I did my family financial budget nearly a year ago and it spans the next 2 years (reason for doing it for a long period was for it to cover my maternity leave and return to work) so I have budgeted for the mortgage payments as they were at that rate plus some small overpayments.

Now with the base rate cuts it means our mortgage payments have gone done so we can effectively make larger overpayments as we will still pay the original amount of the payment, plus the original overpayment despite the payments actually required now being lower.

Anyone else benefitting?

jamesd

It's generally a very poor time to be overpaying on variable rate mortgages:

1. Savings rates that are higher than many variable rate mortgages are still available, even after allowing for tax.

2. Inflation is decreasing the value of the outstanding balance and the value of any overpayments that you make. This effect is likely to slowly decrease over the next 6-12 months, then increase strongly in 24-60 months.

Better to use savings accounts at higher rates that are still available and only put that accumulated savings pot to overpay once mortgage rates go up, the savings rates that are better than mortgage rates go away or you can get a better deal when remortgaging by reducing the balance with savings.

At the moment overpaying is likely to be losing you money.

setmefree2

jamesd wrote: »

It's generally a very poor time to be overpaying on variable rate mortgages:

1. Savings rates that are higher than many variable rate mortgages are still available, even after allowing for tax.

2. Inflation is decreasing the value of the outstanding balance and the value of any overpayments that you make. This effect is likely to slowly decrease over the next 6-12 months, then increase strongly in 24-60 months.

Better to use savings accounts at higher rates that are still available and only put that accumulated savings pot to overpay once mortgage rates go up, the savings rates that are better than mortgage rates go away or you can get a better deal when remortgaging by reducing the balance with savings.

At the moment overpaying is likely to be losing you money.

Hi James,

This is all true. We thought about getting our OPs back and putting them into a higher rate intetest account.

What actually put us off is that whilst it would appear all the banks are safe, what if the're not? Frankly, I wouldn't want to get a large amount of savings locked into another banking fiasco, yet still be left with a large debt - the mortgage.

I think it's still very important to be minimising the risks when looking at your money.

The return of your capital is still as important as the return on your capital;)

setmefree2

Redhead,

We are benefiting alot from the rate cuts as we have a tracker with no collar. Interest rate 2.59%:D (Well it might be if Barclays reduce their base rate - which they haven't yet...)

We have never reduced our mortgage payment so it is currently £1000 per month bigger than necessary.

jamesd

setmefree2 wrote: »

The return of your capital is still as important as the return on your capital;)

I have two credits from the FSCS on my bank statement so I'm pretty sure that the UK government is serious about protecting depositors. I also had some money with A&L (Santander rescue) and B&B (oh dear, another one). The system is working, in spite of assorted aggravations along the way.

Still, you do have to do what you're comfortable with.

setmefree2 wrote: »

We are benefiting alot from the rate cuts as we have a tracker with no collar. Interest rate 2.59%:D

Nice deal!

setmefree2

jamesd wrote: »

I have two credits from the FSCS on my bank statement so I'm pretty sure that the UK government is serious about protecting depositors. I also had some money with A&L (Santander rescue) and B&B (oh dear, another one). The system is working, in spite of assorted aggravations along the way.

Still, you do have to do what you're comfortable with.


Nice deal!

Sleeping peacefully is my ultimate goal at the moment.:D

zebedy

I'm benefitting brilliantly from the base rate cuts.

My mortgage is a BOEBR trackaer at 0.23% above BOEBR so will now be going down again to just 2.23% - Fantastic. I will up my overpayments accordingly.

I need to check the small pront to see if there is a collar but i don't believe there is.

The drop in BOEBR and my changed attitudes have meant i've nicely beaten my target overpayment for this year (and still have December's OP to make) - see sig. I'm going to be a bit more ambitious with my OP target for 2009.

loving this forum!

setmefree2

well done Zebedy

SuiDreams

Well it will be starting to help me know as earlier this year I requested that the Mortgage company not lower my payments if Interest rates decrease, which means I am paying more off my mortgage, without having to increase my payment. Also if you pay money directly off the mortgage rather than into savings there is no risk of you spending that money on something else.

moominyak

I'm on a fixed rate until Oct 2011, curses! :rolleyes:

Ah well, it seemed like a good idea at the time... and if rates go back up it will seem like a good idea again! And if they don't...then I'll leave it go to a SVR next time it's remortgage-time!

Redbedhead

jamesd wrote: »

It's generally a very poor time to be overpaying on variable rate mortgages:

1. Savings rates that are higher than many variable rate mortgages are still available, even after allowing for tax.

2. Inflation is decreasing the value of the outstanding balance and the value of any overpayments that you make. This effect is likely to slowly decrease over the next 6-12 months, then increase strongly in 24-60 months.

Better to use savings accounts at higher rates that are still available and only put that accumulated savings pot to overpay once mortgage rates go up, the savings rates that are better than mortgage rates go away or you can get a better deal when remortgaging by reducing the balance with savings.

At the moment overpaying is likely to be losing you money.

Where are you getting savings accounts at a good rate at the moment? My ISA is maxed this year (6.05%) and we haven't been in a position to do a regular saver (have been on mat leave) and our current everyday savings accounts are paying rubbish rates. I have been looking for some savings accounts that are paying better rates.