Mortgage payments are dropping - what should we do with the extra money?

silvercar

I was paying into the offset to boost the savings pile, but I'm reluctant to do so now. With my mortgage at only 1.75% it doesn't seem that I am saving that much.

I've now got a tidy savings pile and low mortgage payments so I'm bored of saving and spending now:) (Only one -offs not long term commitments, so I can stop when necessary.)

space_rider

Trying_to_be_good wrote: »

I think Halifax and Barclays are still 5%, but get in quick.

I opened a halifax account paying 5% for a year.

vod

Thanks everyone - I really appreciate all the comments. I think the savings route might well be the best road to go down - might as well stow it away and make a few quid on the interest over the next few months.

x

mr_jetlag

If you are a basic rate taxpayer yes you are probably better off with money in the regular saver. An SVR of 3% means that you would have to earn 3.75% AER on your money to match the interest savings on your overpayment.

If you are a higher rate taxpayer I would suggest to put the money into the mortgage as the equivalent savings account would need to earn 5%.

getmore4less

mr_jetlag wrote: »

If you are a basic rate taxpayer yes you are probably better off with money in the regular saver. An SVR of 3% means that you would have to earn 3.75% AER on your money to match the interest savings on your overpayment.

If you are a higher rate taxpayer I would suggest to put the money into the mortgage as the equivalent savings account would need to earn 5%.

ISA avoids the tax issue

Cozworth806

vod wrote: »

Thanks very much for the responses so far - and don't worry - we're certainly not planning on spending the money! Other commitments are far more important than splashing out on treats!

The savings idea hadn't been my first thought at all, but some of your comments certainly suggest it's worth giving that option a lot more thought than I had previously. Can anyone tell me which regular savings accounts are offering 5% or more interest at the moment

Saw that the B&B are offering 6% for a regualr saver if you make no withdrawals for a year

Kate_Thatcham

In my opinion, the OP should check the small print of the mortgage as to whether the overpayments can be withdrawn at a later date, how much notice is required, and if there is a fee. If the overpayments can be easily withdrawn, is it not better to overpay on the mortgage instead of getting a measily small amount of interest on a savings account? Note - it is better to set up the overpayment to be done manually by yourself, rather than authorising the extra payment as a direct debit or standing order, so you have control in case your situation changes quickly.

It might be an idea to have an ISA savings account too though.

(I have a Nationwide tracker mortgage which allows overpayments, and so I am overpaying by up to £499 per month which will knock years off the duration of the mortgage, but I can also reclaim all or part of the overpayment if I have an unexpected large expense to pay or my finances change.)

If you think of how many thousands of pounds you will pay over the life of the mortgage, any way to pay the mortgage off more quickly would seem a better option than putting the money in an ordinary savings account..(?)

HangTime

Kate_Thatcham wrote: »

If the overpayments can be easily withdrawn, is it not better to overpay on the mortgage instead of getting a measily small amount of interest on a savings account?

Not necessarily. (S)he has a 3% mortgage, and as such may be able to get higher returns from certain types of savings accounts (assuming basic rate of tax, a 5% regular saver would pay 4% net)

the_root_of_all_evil

send the xtra to me?

vod

Cozworth806 wrote: »

Saw that the B&B are offering 6% for a regualr saver if you make no withdrawals for a year

Having done a bit of research into this (as a basic rate tax payer) I've discovered that as I have an HSBC 'advance' current account, I'm eligible for a regular saver account which pays 8% interest - as long as the money is in there for a year. This is looking much more positive than I first thought! :j