Put money into mortgage, or savings account?

spikeywan

I've just realised that I may be making a mistake...

My mortgage rate is 0.99%. I was paying about £500 a month, before the rates fell, but now it's dropped to £78.

I'm still paying £500 a month, though, and have acrued £16000 in my savings pot.

I think that if I whipped it out and put it into a normal bank account I'd be better off.

Am I right, or have I missed something?

Thanks.

dimbo61

Well provided you have an emergency fund of 3/6 months of income built up then overpaying the mortgage might well be the best course of action!
By that I mean whats your LTV ( loan to value)
You now need at least 10% deposit to get a mortgage and having less than 75% or even 60% LTV will get you the best mortgage deals.
Dont depend on the ability to get back your overpayments.
I would always build up a good savings pot ( up to £16K think benefits! ) and then overpay the mortgage

opinions4u

spikeywan wrote: »

I've just realised that I may be making a mistake...

My mortgage rate is 0.99%. I was paying about £500 a month, before the rates fell, but now it's dropped to £78.

I'm still paying £500 a month, though, and have acrued £16000 in my savings pot.

I think that if I whipped it out and put it into a normal bank account I'd be better off.

Am I right, or have I missed something?

Thanks.

If you can achieve a savings rate of higher than 0.99% after tax (make additional allowance for higher rate taxpayers), then use savings!

Sites like www.moneyfacts.co.uk will help you identify best buys. Some suggestions below spring to mind.

Easy access - www.theaa.com/savings paying 3% (2.4% net).
Cash ISA - Standard Life 2.65% tax free.
Monthly Saver - Barlcays at 4.25% (3.4% net).

You could achieve higher returns by using fixed rate term deposits, but that runs the risk of the mortgage rate rising while you're tied in to a fix.

The other risk is that you don't manage your savings closely and rates drop. For example, the AA account includes a 2.5% bonus for a year - at the end of 12 months that rate drops sharply and you would be worse off leaving the money there.

So to answer the question, save. But always know the rates you're getting on the savings and paying on the mortgage or you could get caught out.