Overpayment vs saving

KMR304

Hi
I have a fixed rate mortgage ending Sep 24 at 1.94%.
I'm currently overpaying £150 per month.
I'm trying to calculate whether to continue to overpay or whether to open a regular saver specifically for the £150 per month.
I notice that the highest regular saver at the minute is Barclays at 5.12%.
Am I correct in thinking that would be equivalent to 2.6% over the term?

I'm a basic rate tax payer and think that there's probably negligible benefit in a regular saver. Would love to hear thoughts.

Thanks

jonnypb

I believe if you have a fixed mortgage rate of 1.94% then you'll be better putting the £150 a month into a savings account.

Use this calculator - Mortgage Overpayment Calculator: Pay off your debt early?... (moneysavingexpert.com)

KMR304

Perfect, thank you

jj_43

Such recommendations are not practical for most. I am sure these savings earning a few extra £s on the interest rates never end up reducing mortgage balances.

MFWannabe

If you put money into a savings account rather than overpaying are yo7 disciplined enough to us though savings to pay off mortgage or will they end up being used for something else? 

I like the certainty of overpaying mortgage by a certain amount each month as I know savings usually end up being spent 🤦‍♀️

dander

Personally with the uncertainty at the moment I'd save rather than over-pay precisely because the money isn't committed to the mortgage. There's so much in life that's suddenly going up, a decent savings pot can be ready to buffer where it's needed at the time.

fletcher1985

i have just mortgaged at 2.79% for 5 year so i have opened a santander esaver at 2.75% and hopefully soon will find a higher rate and i wont overpay my mortgage i will save it and pay it off after 5 years.  

KMR304

Thanks all, for your comments.

My aim is to use the savings to make an overpayment once the regular savings period finishes and, I agree Dander, savings are there as a buffer in case needed.

Due to Martin's invaluable advice over the years I do have other savings so the buffer will be in case everything else fails.

I'm just trying to make every penny work as best it can. Having taken Martin's advice on most other parts of finance I'm clutching at straws to make other improvements. 

Thank you all once again and thanks to Martin and the team 😀

grumiofoundation

KMR304 said:

Hi
I have a fixed rate mortgage ending Sep 24 at 1.94%.
I'm currently overpaying £150 per month.
I'm trying to calculate whether to continue to overpay or whether to open a regular saver specifically for the £150 per month.
I notice that the highest regular saver at the minute is Barclays at 5.12%.
Am I correct in thinking that would be equivalent to 2.6% over the term?

I'm a basic rate tax payer and think that there's probably negligible benefit in a regular saver. Would love to hear thoughts.

Thanks

The comparison is 5.12% versus 1.94% so obviously 5.12% wins (assuming that you are disciplined enough not to spend it)

But the 5.12% barclays account is not actually a regular saver as you can pay in 5k in one go (not sure why it is listed as regular saver on mse website?)