Two more building societies increase interest rates

de1amo

Charterhouse wrote: »

I fixed because I do not have assets that pay me a floating rate, so why would I want a liability that requires me to pay a floating rate? Obviously there is a fixed rate that would be high enough that I would rather stay on floating but at any long term, low fee fixed rate below 5% I am happy. Despite working in interest rates I do not believe you can predict the Bank of England's moves over the coming years (as the experience of the last 3 years shows clearly) and my mortgage is too big to gamble with. I fixed for 5 years in summer 2006 at 4.89%.

İ was musing over the line-- my mortgage is too big to gamble with--and 160k in 8 years of overpayments----i dont want to ask a personal question but wonder how the ltv is doing!!

Charterhouse

de1amo wrote: »

İ was musing over the line-- my mortgage is too big to gamble with--and 160k in 8 years of overpayments----i dont want to ask a personal question but wonder how the ltv is doing!!

The LTV is under 50%.

To Harry's point earlier, the interest saved on repayments can all be put to work in investments. Sure, if you think you are going to make 20% a year on the stock market then I can see how not paying down a mortgage makes some sense, but that isn't very likely and even so would involve a high degree of risk.

I concede the point that my situation is not necessarily that usual, but regardless of the situation I would put the priority list as follows:-

1. Obtain 6 months Salary as a savings cushion in a building soc account or bank.
2. Pay the maximum available into a cash and S&S ISA.
3. Pay down the maximum possible (if any left) off mortgage.
4. Pay into a personal pension plan.

silvercar

Charterhouse wrote: »

The LTV is under 50%.

To Harry's point earlier, the interest saved on repayments can all be put to work in investments. Sure, if you think you are going to make 20% a year on the stock market then I can see how not paying down a mortgage makes some sense, but that isn't very likely and even so would involve a high degree of risk.

I concede the point that my situation is not necessarily that usual, but regardless of the situation I would put the priority list as follows:-

1. Obtain 6 months Salary as a savings cushion in a building soc account or bank.
2. Pay the maximum available into a cash and S&S ISA.
3. Pay down the maximum possible (if any left) off mortgage.
4. Pay into a personal pension plan.

I would put point 4 between 1 and 2. My 3 allows me to get back the money if I need it, so can probably be merged with 1. so I get:

1. Have 6 months expenditure in the offset part of the mortgage
2. Pay into pension plan
3. Invest in ISAs
4. Enjoy life

Charterhouse

silvercar wrote: »

I would put point 4 between 1 and 2. My 3 allows me to get back the money if I need it, so can probably be merged with 1. so I get:

1. Have 6 months expenditure in the offset part of the mortgage
2. Pay into pension plan
3. Invest in ISAs
4. Enjoy life

I put 4 at 1, but that's just me :j

Pensions are an important part of planning but I do agree with other posters here that you shouldn't pay a load extra in to them unless you really can afford it because you can't get the cash back. ISAs still have tax benefits but can be accessed in an emergency so they can be used as an addition or even as part of 1. if need be.

Anyway, we are talking semantics now, so I will move on.

de1amo

charter--enjoy your life you seem to have invested wisely and achieved a good ltv--your mortgage isnt a gamble--i am sure you could ride out the forcast turbulence--well done!

Harry_Powell

silvercar wrote: »

I would put point 4 between 1 and 2. My 3 allows me to get back the money if I need it, so can probably be merged with 1. so I get:

1. Have 6 months expenditure in the offset part of the mortgage
2. Pay into pension plan
3. Invest in ISAs
4. Enjoy life

Mine is the same (I also understand why you have 'Enjoy life' at 4. - i.e. Once the other 3 are in place, the remainder of your disposible income is just for fun.)

I think that perhaps charterhouse has a final salary pension, or at least a generous company pension and so this could be why he has a lower opinion of them than you and I do. For my part, I don't see any other investment vehicle that gives a better investment return, especially those who don't have a huge amount of disposible income and you're having to fund it entirely by yourself.

Charterhouse

Harry_Powell wrote: »

I think that perhaps charterhouse has a final salary pension, or at least a generous company pension and so this could be why he has a lower opinion of them than you and I do. For my part, I don't see any other investment vehicle that gives a better investment return, especially those who don't have a huge amount of disposible income and you're having to fund it entirely by yourself.

Not final salary, those were all gone long before I saarted work sadly, but I do have a modestly generous company pension (I think I pay in 5% and they pay 10% of my salary), but I have at least 25 years to go til retirement so it definitely has a lower importance for me because of that. That said, don't underestimate what ISAs can achieve. At a return rate of 5%, 7,200 per year becomes £344,800 after 25 years. Now that the limit has been put up, 10,200 is even more impressive, making nearly 490,000 after 25 years. Add in the immunity to capital gains, income tax, and the ability to withdraw it in an emergency and I love ISAs.

Harry_Powell

Charterhouse wrote: »

Not final salary, those were all gone long before I saarted work sadly, but I do have a modestly generous company pension (I think I pay in 5% and they pay 10% of my salary), but I have at least 25 years to go til retirement so it definitely has a lower importance for me because of that. That said, don't underestimate what ISAs can achieve. At a return rate of 5%, 7,200 per year becomes £344,800 after 25 years. Now that the limit has been put up, 10,200 is even more impressive, making nearly 490,000 after 25 years. Add in the immunity to capital gains, income tax, and the ability to withdraw it in an emergency and I love ISAs.

I waded through the massive Pensions Vs ISA thread over on the pensions board a few months back. I think the conclusion I came to was that a pension is great to bridge the gap between the Age Related Allowance (the first £10k you earn is tax free ) and State Pensions (about £6k on average). I therefore have to build a pension pot that will pay out about £4k after I have withdrawn the 25% tax free lump sum. This equates to having about £130k in a pension fund. The remainder of retirement income should be generated via ISAs.

Using this approach means that I will have had the advantage of tax relief on payments made into my pension plan, and yet all of my retirement income will be tax free.

Should I ever move into higher rate tax territory, I'll probably re-think the strategy in order to take advantage of the 40% tax rebate on payments into the pension and 20% taxation on the income from the pension.