My fixed Mortgage vs Savings vs New House Mortgage deposit?

FrugalMav

Hi All

I'm after some advise please on what i should do with my savings as currently have an ISA that was paying 1.5% which is going down to 1% so i moved all the money out of the ISA into a newly setup Santander 123 account to get the 3% interest only to find out a few days after opening it was going to be slashed to 1.5% :mad:

So now my saving rates are going to be lower than my mortgage rate 2.69% so should i use the money in savings to make an over payment on my mortgage? :cool:

Normally the answer would be YES, but as i am looking to buy a new house with my partner sometime next year (I am the only name on my current mortgage) I was wondering would i be better leaving the money earning little interest in the bank to have as a deposit when we both apply for a new joint mortgage on a new house or pay off a big chunk off my current mortgage and use the equity in my current house once sold as the deposit for the next house?
Worked out as mortgage free 4 years and 4 months earlier by making a one off over payment so saving on interest i would have paid.

My mortgage is fixed till 2018 @ 2.69% but only get charged a penalties if i wanted to pay it all off, it is also portable but not sure if that even works if I'm buying a house with my partner (Would need to be a new joint mortgage right?) .

Hope this all makes sense...;)
Any advise would be great and thanks for your time. :money:

AnotherJoe

Yes, as rate is lower than mortgage, pay off mortgage and that money will be the equity in your next house .

Dont forget you'll need an initial deposit at exchange though, so make sure there's enough cash for that. It wont be the whole 10% (or whatever you agree, I've agreed 5% the last two times) because usually that initial deposit money gets passed up the chain AFAICR. But leave a prudent amount just in case.

Yes it will need to be a wholly new mortgage.

swindiff

How much money are you talking about. There are a few accounts paying 3, 4 and 5%

FrugalMav

swindiff wrote: »

How much money are you talking about. There are a few accounts paying 3, 4 and 5%

15k, the only accounts that were paying more only have a limit of 2.5k?

swindiff

If you are a couple you can have 3 accounts between you.

So £6k in TSB at 5%
£7.5k in Nationwide at 5% (for 1 year, then reverts to 1%)
£15k in Club Lloyds at 4%
£9k in Tesco at 3%

If you are single you can hold 3 Bank of Scotland Accounts at £5k each. So £15k at 3%

swindiff

You can also feed a savings account such as nationwide with £500/month at 5%. So drip feed it from one of the 3% paying accounts

swindiff

There is a useful calculator here

https://www.bankaccountsavings.co.uk/calculator

You could net 4.4% on £15k as a couple, just using current accounts. Could do slightly better if also drip feeding into savings accounts.

FrugalMav

Thanks for the advise, yes i have looked at this and although we have been together for a few years we are not ready to have any joint accounts as not lived together long so wont have a joint until we get a house together. She also has done what you have suggested with her money by setting up multiple current accounts and drip feeding them.

FrugalMav

Also as advised by moneysavingexpert to wait till November when the 123 account gets cut to 1.5% to see what all the other banks do as sure they will also follow.