Is this a no-brainer, or am I a no-brainer?

peterwhite097

Hi all, opinions appreciated.

Myself and the wife, bought our first place a couple of months ago. We have a 5 year fix with Brit/Co-op at 5.04%, paying £395 a month repayment. I've got about 10k sitting in a Brit ISA earning a paltry 0.5% or thereabouts, which I need to do something with (also got 3k in an A&L ISA at 3%, but no transfers into that).

I can overpay by up to 10% of opening balance before this year end. This would be £6,300. I think I should pay this full amount in as a lump sum right away, what with savings rates being 'uncompetitive', unless I lock it in for 5 years in a bond with who knows what happening to interest rates.

There is an option, if overpaying by over £500, to have the monthly payment recalculated, but I think the current level is ok.

Many thanks if you can help.

Peter

pawlala

Using your 10% allowance if you can afford it is essential given the interest rates in your post. If you are combining the two methods of OPing, be careful and ensure that you get in writing (if at all possible) confirmation that you are able to make the 10% annual overpayment and then also bigger monthly payments. I say this because if you do both it will be more than 10% a year and you could be subject to charges without realising

getmore4less

If you are not likely to use up your ISA allowances in the next few years then overpaying now makes sense and top up the saving from income(monthly savers usualy offer better rates), but do leave a decent emergency fund.

There are better rates for the money if you look aroundbut 5%+ is not easy to get.

peterwhite097

Many thanks you two. Good point about checking the overpayments.

Rainmaker_uk

You might also want to look at some of the other stocks and shares ISAs in markets such as Asia where ISA returns have been performing pretty well. More risky but better upside than a ISA UK index tracker.