Get a grip woman!

Karmacat

That sounds a fascinating analysis to make, SL. When you're fresh from your time away (tho thats going to be pretty tiring!) that'll be a good'un.

trix-a-belle

it is a very good question SL & one i am looking closer at myself also, with an ISA sat at x%, mortgage at y%, high interest current accounts and regular savers at a,b & c% which way is best to go and what to actually retain/continue with

enthusiasticsaver

I always think it is a good idea to have a balance of savings and overpaying mortgage. In an ideal world we would always do a combination of up to 10% mortgage overpayments as more than that incurred penalties. Even if mortgage rates were lower than savings rates there was no guarantee they would always be that way and in fact with savings rates now staying extremely low most mortgages rates are higher than savings these days. The best way we found of doing it was regular savers for the best interest rates then use the matured sum to overpay the mortgage.

Suffolk_lass

Well, here I am, in Europe, on our holidays (what can I say? - the view is normally lovely etc, etc, but yesterday, all was obscured by clouds and rain) - so I thought I would actually look at the analysis I said I would do.

Our mortgage was just over £72k when we set off on our hols and we were paying just 0.99% interest (this has increased by 0.25% at some point between 2nd August (the BoE announcement) and the 17th August (the date by which our lender will apply it).) Based on those figures that will cost us an additional £15 a month or £180 a year.

We were paying just over £60 a month in interest on this debt. Our only other debt is the residual payments on the 0% interest double glazing, and that will end this year. So the £720 p.a. we were paying, is now £900 p.a.

I have always intuitively kept a few pots of savings, with a combination of cash, bonds and a couple of S&S ISAs but I have never been a Current Account Tart, moving money to maximise interest income or accrue bonuses as I prefer a good credit rating associated with the stability. The closest to this was when we each had a massive cash advance from MBNA CC (one each – he for £15000, me for £12000) and we invested them for the interest free period to make some additional income. It was years and years ago and we may have earned 10% interest on the £27k for maybe 9 months.

Anyway, time to turn down that comfortable, smug complacency filter again. So, on my ancient laptop that I brought away on holiday (yes, really), I have been modelling a few things.

Cash Savings
We have an emergency fund that is normally just over £10k - that is £10k + that month's TTs. I confess I have let this build up a bit this year, so that the holiday credit card bills can be accommodated without a “rice and beans” diet for several months this autumn. It has been growing by just 0.1% interest. If it were to generate over £75 of interest per month it would pay for the mortgage interest. But it doesn't. And neither do any of our collective cash based savings, currently.

I begin to see how much people have to have in savings for it to outweigh the benefits of simply over-paying their mortgage.

Our current accounts
We have two current accounts at the moment. One primarily for bills, with HSBC, has £1000 free OD facility but no rewards, and the other for running costs, with Co-Op that pays £4+£2 per month that there are the right number of DD, at least £1000 in and no OD (there is a £200 free OD facility here). I cocked up last month so no £6 this month for us. We have a total of 12 regular monthly DD on the bills account, and 4 on the other. The TTs go into the Instant saver that sits alongside the Co-Op account.

Our options
Nationwide pay 5% for a year on balances up to £2500 with some payments in and out conditions. We could have three of these I think – one each and a joint one (that I would need to shuffle every month, to meet the regular payments in criteria). If I moved £2500 to each from the instant savings account, each would generate £10.42 per month, or £375 for that year. So for £7500 of capital tied up, these could generate £31.26 of interest, each month. Even for a year, this looks like a good option. I would be tempted to increase the instant saver to £3000 so I have enough to cover any appliance failures.

Tesco offer 3% on up to £3000 with £750 pay-in and 3 DD per statement month so up to £90 on a year (but this is only guaranteed until April so 7 months – at £7.50 a month for tying up £3000. Not convinced.

We could also switch bank accounts.

I prefer Co-Op to Halifax Rewards but the Halifax pays £75 switching cash bonus and then for £750 paid in and 2 direct debits it pays £3 until October, then £2 thereafter. I could switch the HSBC to Halifax, get the £75 than switch again in October.

I am not considering the accounts with vouchers for things I don’t use – so no to First Direct as we don’t use Expedia. Bose headphones sound nice but DH has some cheap in-ear noise cancelling headphones that work as well, and although other people can be annoying, my job is all about communication with others!

M&S offer a £125 gift card and then £5 a month for £1000 paid in with two active DD. Maybe I could switch the Halifax to them in October.

That feels like a plan. 3 Nationwide Reward accounts and switch to Halifax from HSBC, then on to M&S later in the year.

Suffolk_lass

So let's discuss the plans for different bank accounts, I suggested.


OK but... said he...
No lower standard of living and that sounds like a lot of work for not much return.


And that is why I am the one pretending to be a responsible grown up in this household!

Karmacat

Oh boy! What a productive, thoughtful way to use your unexpected downtime, and, um, what a response you got. I've never switched accounts before, and I was counting on First Direct, but I don't use Expedia either grrr.



I hope the weather improves *really* soon!

Busy_Mee1

Hi Suffolk Lass I hope you are enjoying your holiday. I must admit I have also been known to do a bit of financial plotting and planning on holiday. Being away from work gives me the headspace to think things through.

As you know I am a bit of a current account tart and have switched numerous times over the last couple of years to get the cash bonuses. This has been very lucrative but I have sadly run out now and I am now using the accounts I have to cycle £1750 a month through 5% regular savers. It does take a bit of effort and organisation to get it all set up but it is all automated now.
We are trying to max out the PSA - we have a tax free allowance of £1000. ( £500 each) As 40% rate payers this is worth £1400 in real terms.

The Nationwide accounts are definitely worth considering, as not only do they offer 5% on £2.5k for the first year, 5% on a regular savers but they also have a recommend a friend switching bonus. You can open one account and then recommend OH. If he then switches you get £200 to share. If you save in the regular saver, once it matures you could then just pay it off your mortgage or put it in an ISA.

The other option if you want an easier life is just to bung the £10k in an either an easy access or fixed rate account that is paying more than you are currently getting. We put a similar amount in a fixed rate Virgin ISA for 2 years paying 1.8%. This is still beating our mortgage interest rate despite the rise in base rate. MSE lists all the accounts with decent rates.

I hope the weather has improved, it has turned cool and rainy here so you are not missing any good weather at home.:)

Suffolk_lass

DEBTS


Mortgage [STRIKE]£110,621[/STRIKE] 68,000 (£42,621.00 paid so far)
Barclays 0% Finance for double glazing [STRIKE]£8,755.54[/STRIKE] £795.96 left (£7,959.98 paid off)
[STRIKE]DH's car - paid off on 21st Aug 17 £3,476 £0 (£3,476)[/STRIKE] all finished!

Total [STRIKE]£122,852.54[/STRIKE] £68,795.96 - that is £54,056.58 or 44% paid off so far.


SAVINGS
£10,173.35 Emergency pot
£12,819.68 S&S ISA with Fidelity International (original £10,000 some years ago, no further capital added)
£8.946.50 DH's S&S ISA (with Charles Stanley Direct]
[STRIKE]£3,155.32 2 year Bond with Skipton BS @ 4% Finishes 31 Jan 2018 - This was used to reduce the mortgage![/STRIKE] all finished
£11,330.58 7 year bond with Skipton BS - matures Oct 20
[STRIKE]£38,630.43[/STRIKE] £43,270.11 Total actual cashable savings and just 12.01% better than when I started

Shortfall -£25,525.85 (all debts)

With the mortgage interest rate increase (by 25% for us, from 0.99% to 1.24%) I elected to pay just over £4000 off the mortgage using the extra bits from the emergency fund and what appeared to be a bit of unspent money in one of the current accounts. No season ticket in August helps enormously!

Suffolk_lass

Thanks for the insights Busy Mee1. Very interesting. We've got a bit of a do this weekend so it remains to be seen whether the planned accounts get opened.

enthusiasticsaver

A few years ago I did all the high interest current accounts with our cash savings, regular savers and constant account switching for rewards, cashback and bonuses. As we retired we simplified and now just have Tesco accounts, Santander 123 and a Tesco Internet saver which is just coming to the end of its bonus period. The interest rates on a lot of the current accounts have reduced or maximum limit taken down to very small amount and I considered the work to circulate the monthly payment requirements and direct debits outweighed the return. My DH like yours also wasn't interested so I simplified. A lot of it consequently was invested instead in stocks and shares isas and sipps and we just have enough ready cash for emergencies, supplemental income for the next 3 years until one other pension pays out plus our new kitchen money/holiday money for next year. In your position I would do as you have done and paid it off the mortgage.