My mortgage

momomoney

I can't go in to details but I'm luckily (don't ask) still on my tracker mortgage, which tracks at base rate.

My question is, if you were in my situation, when would you look to fix it?
I work for a major financial institution and monitor interest rates so I think in or around 2014 would be good. Obv a way off, but just wanted to guage people's reactions.

Also, I have about £15k sitting in my cash ISA, guaranteed £18k windfall in a few months. I'm tempted to throw the majority of this all in to my mortgage while the rate is so low. I don't have overpayment fees.
Would the money be best picking up interest, or put towards my mortgage?

Like I said, I'm pretty certain about what I'm going to do (leave the ISA, put most of the £18k towards mortgage + a couple of top notch holidays), I just want to see what the experts on here would think.

JimmyTheWig

I wouldn't overpay the mortgage if I were you.
I'd put the £18k into a savings account and earn interest on it.
Even if you only get 3% interest and pay higher rate tax on that, that's still 1.8%. Much better than saving 0.5% by paying it off the mortgage.

As to when to switch to a fixed rate, it depends. The biggest question is how much can you afford to pay if it comes to it.
I think when rates go up they will do so slowly. Obviously fixed rates will go up with them, so you might not want to leave it too long. But if they go up slowly then you'll have plenty of warning of when to fix.

Generally speaking you pay a premium for a fixed rate because you get the benefit of knowing that your rate won't go up. And so generally speaking a variable rate is better value in the long run.

You might want to hold back the £18k to help pay the monthly repayments if variable rates go through the roof. That means that you'll be able to afford it even if rates go up a lot.

While your rate is so low I suggest you put money aside each month into a savings account. You can then add to your £18k fund for if rates go sky-high and you should be able to pay off your mortgage much quicker.

momomoney

Thanks for the info. Didn't think of the flip side so glad I asked. I agree rates will go up slowly when they eventually do.

I do put savings away. Even though I'm close to 30 my family still have it nailed in my head to make sure I put money away. I get paid pretty well and can expect decent bonuses too so that helps.

Holding back the £18k is a lot less likely... I get cheap flights (family works for airline) so definitely exploiting that when it comes around.

JimmyTheWig

Fair enough to spend some of it (I think we all would!) but my point for the part of it that you aren't going to spend is to keep it in savings rather than pay if off the mortgage straight away.