Paranoid or What???

antdon

I am 20 years into a 25 year £53,000 mortgage. (I know that sounds like a small amount now.....)
(The mortgage is (I think) a tracker at 0.68% above base rate, Plus a small repayment part)
the outstanding on the mortgage is currently £49,600

I have just had my first endowment pay out.
I have also just had a mortgage ppi pay out (£5900) :jwoohoo!!!
Both amounts are currently in a savings account in the Halifax...
Total £22000 (account 2.8% gross)(don't laugh:rotfl:....)

I have a second endowment 5 years from ending with a current surrender value of approx £13,000

So if surrendered my total is £35,000
Giving a figure of £14,500 outstanding on the mortgage

So what would you do. Given the state of the world markets????.....

The temptation is to take a personal loan (unsecured) over 5 years and pay off the mortgage... (I know this may seem a little mad.. But the theory goes that If the world banks collapse, the house being mine and unsecured against the loan is safe)

I would be really grateful for any comments advise etc....
(Please try not to use the word paranoid)

katsu

I am not personally concerned about the banks collapsing and taking my house. I would not advise a personal loan as the interest rate would be higher than the mortgage so cost you more.

Lois_E

An unsecured loan would be at a much higher interest rate. You'd be losing loads of money for very little extra security. Even if the world banks fail, it's monumentally unlikely that they will start taking houses away from mortgage-holders who are able to keep up their payments. If you are not able to keep up the payments, then they will come after you whether your debt is secured on your house or not, and if it's not secured on your house they will go to court and put a charging order on it anyway.

The bottom line is that you have a £14,500 shortfall to make up and 5 years to do it in. Since your savings are earning at a higher rate (even net) than your mortgage is costing you, I would start saving now as much as you can. Put it into your Halifax account, but first take some out of there and max out your ISA allowance for the year. If you want tips on how to reduce expenditure and increase your income with the aim of reaching mortgage-freedom, you've come to the right place here.

Good luck, and welcome to MFW.

antdon

Many thanks for the replies....

Like most people here... I suppose I have just suddenly got the bug to try and pay the mortgage off... somehow.....

I realise that my mortgage has dropped by approx £250 a month in the last 5 years..... And that, If I bank the £250 for the remaining 5 years I will have enought to pay off the remainder....

In all probabilty the mortgage rate will remain low for the next 12-24 months but after that..... I can still remember 18% in the 80's (shudder)

Sepa74

The world economy is so rotten at the moment that 18% interest rates are VERY unlikely in the next 5 years. The BoE should increase rates when inflation is high, like it is at the moment, but the government's drive to reduce debt means the BoE is extremely unlikely to increase interest rates dramatically because it would plunge the country back into recession.

Your interest rate is really low, so definitely save as much as you can at the highest interest rate you can find for the next 5 years. Even if the BoE increases rates sometime in the next couple of years, your rate is so low that you are likely to continue to be able to find a savings rate higher than your mortgage rate - you are very lucky!

I would reassess the situation only if you can't find a savings rate higher than your mortgage.

One other thing, your mortgage is a contract, so the banks can't just repossess your home if you are keeping up with your payments. A contract is an agreement between two legal people and as long as you are keeping up your side of the bargain, the courts will ALWAYs insist the bank keeps theirs. British courts have a proud 700 year history of upholding contracts, and civilisation as we know it would have to end before this changed. It's one of the benefits of living in a country with the oldest legal system in the world :j

I hope this helps make you feel a little more confident about things. Yes we're going through an economically difficult time at the moment, but it's nothing compared to the 30s or 1890s, so keep on keeping on and you'll be fine

Lois_E

Sepa74 wrote: »

The world economy is so rotten at the moment that 18% interest rates are VERY unlikely in the next 5 years. The BoE should increase rates when inflation is high, like it is at the moment, but the government's drive to reduce debt means the BoE is extremely unlikely to increase interest rates dramatically because it would plunge the country back into recession.

Your interest rate is really low, so definitely save as much as you can at the highest interest rate you can find for the next 5 years. Even if the BoE increases rates sometime in the next couple of years, your rate is so low that you are likely to continue to be able to find a savings rate higher than your mortgage rate - you are very lucky!

I would reassess the situation only if you can't find a savings rate higher than your mortgage.

One other thing, your mortgage is a contract, so the banks can't just repossess your home if you are keeping up with your payments. A contract is an agreement between two legal people and as long as you are keeping up your side of the bargain, the courts will ALWAYs insist the bank keeps theirs. British courts have a proud 700 year history of upholding contracts, and civilisation as we know it would have to end before this changed. It's one of the benefits of living in a country with the oldest legal system in the world :j

I hope this helps make you feel a little more confident about things. Yes we're going through an economically difficult time at the moment, but it's nothing compared to the 30s or 1890s, so keep on keeping on and you'll be fine

Wise words from Sepa. When you are comparing mortgage and savings rates, remember to adjust the savings rates for income tax, unless they are ISAs.

Sepa, you intrigue me. I know about the 1930s, but what happened in the 1890s?

Captain_Pie

Lois_E wrote: »

Sepa, you intrigue me. I know about the 1930s, but what happened in the 1890s?

I presume Sepa is referring to the 1980s, where as we know, inflation went through the roof and the government increased interest rates to double figures.

Unless of course, Sepa remembers the 1890s?

dimbo61

Could you look at a regular saver as a few lenders are offering good rates and allow £250/500 a month or save into cash ISA,s at least the interest is TAX free !!
If all else fails then start to overpay each month

Sepa74

No, I meant the 1890's! I don't remember them (honest!) but it was another time of very bad recession. It particularly hit farmers certainly in Australia and Canada and the US, and in the UK too.

I've just done some quick googling, it seems there were several financial collapses at in the first half of the decade in several different countries which led to meltdown in Latin America and global depression in 1893.

http://en.wikipedia.org/wiki/Panic_of_1890

http://eh.net/encyclopedia/article/whitten.panic.1893

Recessions / depressions caused by banking collapses like the one we've just had / are in at the moment are always extremely severe and take a long time to recover from, particular if they are global in nature.

lol... sorry, I studied economics at Uni, sometimes I can't help myself

pawlala

Sepa74 wrote: »

The world economy is so rotten at the moment that 18% interest rates are VERY unlikely in the next 5 years.

Even that sounds optimistic.