savings or mortgage

tsmiggy

I owe £2700 on a tracker mortgage and i am paying 1% above the interest rate.I also have £2100 sititng in a first direct account paying about £7 a month interest.Would it be sensible to use my savings to make a big hole in my mortgage

thanks

mleonard79

Hi Tsmiggy,

The BOE base rate at the moment is 5.25% so if you're paying 1% above this then you're paying 6.25% on your mortgage - the bank is meeting next Thursday as well and it is almost certain they will be putting interest rates up another quarter percent so that would make it 6.5%. You could get this rate on an ISA for savings but not really any higher and really for such a small amount at that rate I would pay it into the mortgage so you can get your mortgage paid off sooner. It would be different if you had a large amount to pay back and you were on a better mortgage rate as then you could make some money by saving instead of paying off the mortgage but in your case I'd just pay it into the mortgage - it'll bring you a step closer to no mortgage too and that's always a great feeling (I'm told !)

Regards

Michelle

tsmiggy

Thankyou for your sound advice.:T

Tony

dunstonh

ISAs (mostly stocks and shares version) can be far more valuable to utilise in the long term than paying off bits of the mortgage. Having a pot of tax free investments can save a lot of money later in life. Far more than paying bits of mortgage. Especially if you are a higher rate tax payer.

McSaver

the most sensible thing to do with money is to pay off what you owe before you can start saving.