Should I pay off my mortgage?

edinburgher

I've just some some rough calculations and if I used my 70k ISA pot and continued my current savings contributions, assuming the mortgage is paid off in about 3 years, the ISA pot would accumulate to approx 400k in 25 years assuming an average interest rate of 3%

Therein lies the rub - your assumptions don't match your reality

A lump sum of £70k invested for 25 years with an additional £480/mth paid in @ 3% will yield c. £362k at the end of the term.

Your actual ISA rate is 1.5%. Let's be charitable and deduct 2% for inflation, your real rate of return is -0.5%.

A lump sum of £70k invested for 25 years with an additional £480/mth paid in @ -0.5% will yield c. £197k at the end of the term - c. £165k less than you are projecting :eek:

Don't know about you, but £165k would be enough of a difference to wreck my retirement....

Your money needs to work harder for you :beer:

GrimlyFiendish

Sobering figures Edinburger.
I'm assuming (famous last words) savings interest rates will not stay at 1.5% for the next 25 years (which as I understand it is low). Does inflation historically outstrip any interest rates to cash savings?

Any pointers as to where I could start researching the best place to start investing S & S ISA's?

edinburgher

Not sure re. interest vs. inflation.

For the investing side of things, this Tim Hale book is cracking. No nonsense, evidence based.

GrimlyFiendish

Thx abouttimeto
I'll look into those accounts. There's a bit more setting up to them but once it's done the rates look worth it.