Mortgage interest below inflation- any point in overpaying?

resilie

Canvassing for opinions here:
Having recently remortgaged my interest now lies below the inflation rate (just). I have been an enthusiastic overpayer of my mortgage up till now but do wonder whether it would be wiser to invest the money otherwise (though I have been struggling to find a product that pays above my mortgage interest taking into account that I am a higher rate tax payer; ISA rates are shocking! )
More generally what do ppl think about the notion that you shouldn't endever to pay off your mortgage quickly as house prize inflation, general inflation and rising wages will do all the hard work for you?
Discuss!

Gary123456790

Hi,

The most important thing is what is your mortgage interest rate and what rate can you get in savings?

I.e. if your mortgage is at 1%, and you can get 3% in savings, then put it in savings.

Similarly if your mortgage is 4.5% and savings 3% then put it into the mortgage.

Remember if you have to pay tax on the savings this effects the result, and also that you cannot always get overpayments back out of a mortgage so you should keep an emergency fund for car/boiler/health breakdown.

Waiting for inflation to devalue your mortgage seems a bit pointless - you'll have paid so much interest in the meantime you might as well have paid it off. You have to pay it off sometime, the sooner the better.

Thanks,

Gary.

resilie

Well my mortgage rate is 1.99, my ISA pays 1.7 and I'm a higher rate tax payer so would need quite a good rate for it to pay off. A close call though.

brit1234

Overpay, overpay just keep overpaying while rates are low otherwise you will kick yourself when rates go up.

I expect saving rates to creep up from January with ending of FTL but I don't expect 3% saving rates in next 6 months.

itsanne

Whether or not you overpay, maybe you should think about transferring your ISA for a better rate?

Thrugelmir

resilie wrote: »

More generally what do ppl think about the notion that you shouldn't endever to pay off your mortgage quickly as house prize inflation, general inflation and rising wages will do all the hard work for you?
Discuss!

House price inflation and general inflation don't do anything to repay the debt. So unless you are in a position to downsize with equity there's zero benefit.

Rising wages are currently below the increase in the cost of living for most people. So unlike years gone by , debt isn't being inflated away by pay rises. Totally the reverse. Austerity in one form or another will be with us for some years yet.

Pensions is another crisis issue that many people have yet to wake up to. As the state pension returns to what it originally was. A supplement to an individuals own savings to keep them out of poverty. So people will need to save more for themselves. Another reason why not to be over burdened with debt.

opinions4u

Can your savings / investment return be expected to exceed your mortgage interest rate?

You can get a guaranteed return of 1.99% by repaying mortgage debt.