Overpay now on 3.44% or next year on reduced %?

We have decided to overpay on our mortgage with the intention of clearing it earlier. We have a year left on a 3.44% fixed and around 157k left to pay over the whole mortgage period. We plan to reduce the term and the interest rate next year when the fixed rate ends.
So my question is this - do we start overpayments now to reduce the balance before reducing the term next year or do we put it all into our savings account and pay it into the mortgage when the interest rate has reduced?


  • AnotherJoeAnotherJoe Forumite
    19.6K Posts
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    Are you getting savings above 3.44% ?!!
  • Hahaha no! So starting overpayments now is the way to go?
  • ian1246ian1246 Forumite
    191 Posts
    Fourth Anniversary 100 Posts
    Are you able to funnel the overpayments through regular savers?

    We're in a similar boat to yourself - 2.84% Mortgage Rate, wanting to start overpaying. Our mortgage is up for renewal at the end October 2020 - I m hoping for rates of around 2% (provided interest rates don't go up!).

    The Plan is to open up a HSBC Regular Saver in October 2019 - able to save up to £250 a month at 5% interest.

    I also plan to open a M & S Account & Linked Regular Saver (up to £250 per month at 5%) and a First Direct Account & Linked Regular Saver (up to £300 per month at 5%) in October 2019. Granted: We ll only be able to afford to put about £50 a month into each of the M&S & First Direct Accounts initially, but by opening them it will allow us to put more £££ in as funds become available.... whilst ensuring they mature just before our mortgage renewal, so that we have the cash available.

    We can then take the cash we have built up and either overpay the mortgage just before renewing it onto a fixed deal (so no early-repayment charges!), or if the mortgage interest is low enough: If we are fixing the mortgage for 5 years, I would take the £££ saved and put them into a fixed 5 year saver. I.e. the best 5 year saver currently is 2.6% - so if we fix the mortgage next year at 2%, it would make sense to fix the savings at 2.6% and earn higher interest than if we overpaid the mortgage.

    In 5 years time we can then review and decide what to do with the cash (overpay the mortgage or again, save it).

    Moving forward beyond that the plan is then to have rolling Regular Savers, maturing every year in October - which we will then put into a fixed 4 year saver, then the next years worth of savings from the regular savers, putting into a 3 year fixed saver, then the next year into a 2 year saver and then 1 year saver etc... - the idea being when the fixed mortgage comes to an end, we ll have a years worth of regular savers at 5% Interest maturing and also 5 Fixed Savings Accounts (5,4,3,2 & 1 year fixed savers, respectively) maturing just before the mortgage ends its fixed deal.

    Depending on Interest rates & Saving Rates - we can then either take this cash and overpay the mortgage... or fix for another 5 years and in turn put the savings into a fixed 5 year saver, earning higher interest. We would then just repeat the previous 5 years!


    Just a thought for you on a possible alternative plan, to ensure your £££'s work as hard as possible without the risk of investing :-)
  • AnotherJoeAnotherJoe Forumite
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    10,000 Posts Fifth Anniversary Name Dropper Photogenic
    Hahaha no! So starting overpayments now is the way to go?
    If you cant save higher than the rate you are paying then yes pay it off asap.
    Simple example you pay £3.44 on a years interest on £100, put your savings away at lets say at 1.5% so you get £1.50, you've lost £1.94 compared to paying that £100 off and saving £3.44.
  • BrodiebobsBrodiebobs Forumite
    1K Posts
    Part of the Furniture 500 Posts
    our mortgage rate is 1.99% we currently OP £100pm and put £250pm into a 5% saver.

    Our fix isn't up til 2021 but when the saver matures i'll either pay it into mortgage or into another saver.

    Head says saver is right thing to do financially, but I like seeing the balance fall so think its a good balance of head/heart. :o

    Although for mortgage tracking purposes I include the saver amount (before interest) in the OS mortgage calculations.
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