Chase Savings/MoneyBox S&S ISA/Mortgage Overpayment

robgoode

Over the last year we have been overpaying our mortgage by £400 per month but unsure if this is wise based on current savings rates increasing.

Our mortgage is fixed at 2.4%. From what I've previously read and seen on Martin's show, we have been overpaying the mortgage as the rate was higher than the savings rates at the time.

Currently we both hold Chase Savings accounts that are due to go up to 3% along with Moneybox Stocks and Shares ISA accounts which so far are up 5.65%.

We had also opened Zopa accounts and created the various pots to do the ladder technique, first pot due to mature beginning of April on 3.26% but no large volume of money has been moved over yet.

Would we be better off putting our £400 into either our Chase Savings accounts, add to our Stock and Shares ISA or overpay our mortgage? 

Thanks for any help provided.

grumbler

robgoode said:

Would we be better off putting our £400 into either our Chase Savings accounts, add to our Stock and Shares ISA or overpay our mortgage? 

Chase is obviously better than overpayments.

Stocks&Shares means gambling, you can even lose money instead of making profit.

MSE article: Repay debts or save?

retiringtoosoon

grumbler said:

robgoode said:

Would we be better off putting our £400 into either our Chase Savings accounts, add to our Stock and Shares ISA or overpay our mortgage? 

Chase is obviously better than overpayments.

Stocks&Shares means gambling, you can even lose money instead of making profit.

MSE article: Repay debts or save?

Is investing the same as gambling? I’m a bit surprised by that. 

george4064

grumbler said:

robgoode said:

Would we be better off putting our £400 into either our Chase Savings accounts, add to our Stock and Shares ISA or overpay our mortgage? 

Chase is obviously better than overpayments.

Stocks&Shares means gambling, you can even lose money instead of making profit.

MSE article: Repay debts or save?

If you are referring to investing in general as 'gambling' like your post above suggests, then I wholeheartedly disagree.

Obviously there is a degree of risk with investing, but if you are invested within your risk tolerance, globally diversified and in it for the long-term then investing is just an efficient use of capital to achieve investment growth and/or income for the investor.

To expand a bit and to give two extreme examples, investing in a handful of stocks/crypto for a holding period of a few months is akin to gambling. However investing in a passive world index equity fund for a holding period of 10 years+ is very much investing and you are practically 99% likely to have a positive return over that time frame.

I've seen some charts which show the probability of a positive return from investing at different time periods, that probability increases as the time period increases. I'm sure someone will be able to dig it out if needed.

grumbler

retiringtoosoon said:

grumbler said:

robgoode said:

Would we be better off putting our £400 into either our Chase Savings accounts, add to our Stock and Shares ISA or overpay our mortgage? 

Chase is obviously better than overpayments.

Stocks&Shares means gambling, you can even lose money instead of making profit.

MSE article: Repay debts or save?

Is investing the same as gambling? I’m a bit surprised by that. 

Basically yes. Saving deposits are risk-free (to certain limits). Any expected profit higher than the saving interests comes with some risk. It's financial law. The risk means that the profit can be bigger, smaller, zero, negative. Probabilities of this can be small, but not zero - whatever you do in terms of diversification.  I don't see any essential difference from gambling. There are even special gambling products linked to financial markets - they exist only because of inherent uncertainties = risks.

e.g. https://www.ig.com/uk/trading-strategies/how-to-spread-bet-on-the-ftse-100-210505

george4064 said:

grumbler said:

robgoode said:

Would we be better off putting our £400 into either our Chase Savings accounts, add to our Stock and Shares ISA or overpay our mortgage? 

Chase is obviously better than overpayments.

Stocks&Shares means gambling, you can even lose money instead of making profit.

MSE article: Repay debts or save?

... but if you are invested within your risk tolerance, globally diversified and in it for the long-term then investing is more likely an efficient use of capital

"More likely" means uncertainty. I call it 'gambling'.

Regarding "long term", the OP has a fixed-rate mortgage. Is it 3 years? 5? We don't know.  Is this term long enough? And again really long term makes the risk lower, but doesn't eliminate it completely.

retiringtoosoon

grumbler said:

retiringtoosoon said:

grumbler said:

robgoode said:

Would we be better off putting our £400 into either our Chase Savings accounts, add to our Stock and Shares ISA or overpay our mortgage? 

Chase is obviously better than overpayments.

Stocks&Shares means gambling, you can even lose money instead of making profit.

MSE article: Repay debts or save?

Is investing the same as gambling? I’m a bit surprised by that. 

Basically yes. Saving deposits are risk-free (to certain limits). Any expected profit higher than the saving interests comes with some risk. It's financial law. The risk means that the profit can be bigger, smaller, zero, negative. Probabilities of this can be small, but not zero - whatever you do in terms of diversification.  I don't see any essential difference from gambling. There are even special gambling products linked to financial markets - they exist only because of inherent uncertainties = risks.

e.g. https://www.ig.com/uk/trading-strategies/how-to-spread-bet-on-the-ftse-100-210505

arent risk-free savings at risk of being eroded by inflation?

Could you expand more on this financial law you're referring to?

Albermarle

grumbler said:

retiringtoosoon said:

grumbler said:

robgoode said:

Would we be better off putting our £400 into either our Chase Savings accounts, add to our Stock and Shares ISA or overpay our mortgage? 

Chase is obviously better than overpayments.

Stocks&Shares means gambling, you can even lose money instead of making profit.

MSE article: Repay debts or save?

Is investing the same as gambling? I’m a bit surprised by that. 

Basically yes. Saving deposits are risk-free (to certain limits). Any expected profit higher than the saving interests comes with some risk. It's financial law. The risk means that the profit can be bigger, smaller, zero, negative. Probabilities of this can be small, but not zero - whatever you do in terms of diversification.  I don't see any essential difference from gambling. There are even special gambling products linked to financial markets - they exist only because of inherent uncertainties = risks.

e.g. https://www.ig.com/uk/trading-strategies/how-to-spread-bet-on-the-ftse-100-210505

george4064 said:

grumbler said:

robgoode said:

Would we be better off putting our £400 into either our Chase Savings accounts, add to our Stock and Shares ISA or overpay our mortgage? 

Chase is obviously better than overpayments.

Stocks&Shares means gambling, you can even lose money instead of making profit.

MSE article: Repay debts or save?

... but if you are invested within your risk tolerance, globally diversified and in it for the long-term then investing is more likely an efficient use of capital

"More likely" means uncertainty. I call it 'gambling'.

Regarding "long term", the OP has a fixed-rate mortgage. Is it 3 years? 5? We don't know.  Is this term long enough? And again really long term makes the risk lower, but doesn't eliminate it completely.

Cash savings - During most periods the interest from cash savings is less than inflation. From time to time the interest rate goes marginally above inflation. I do not know the exact figure but you can probably say over a long period, say 15 years, a guaranteed loss in value of your savings of 30 %?. 

Globally diversified mainstream investment funds. Based on 200 years of historical statistics , over 15 years you can expect a range of results from 0% to over 100% growth. More likely to be somewhere between 50% and 100%.

So in fact being 100% in cash savings is more of a risk than being invested, over the long term.
For the more cautious types, being in a mixture of cash and investments, hedges your bets ( to use a gambling analogy)

grumbler

retiringtoosoon said:

arent risk-free savings at risk of being eroded by inflation?

OK, let's say that savings have the lowest risk possible, not zero. This is a starting point for any other products offering higher return together with higher risk.

Could you expand more on this financial law you're referring to?

It's all around us. Ignoring promotional offerers, mortgage is the cheapest way of borrowing money (lowest return for a lender). That's because the lender's risk is minimal. Loans are more expensive - they are unsecured, more risky, but theoretically can be secured on property. Credit cards - they are so expensive because defaults are very common.

Just few top results of google search:

https://www.fca.org.uk/investsmart/risk-returns

In reality, the higher the returns you want from an investment, the more uncertainty (or risk) you need to expose your money to.

https://www.investopedia.com/ask/answers/040715/there-positive-correlation-between-risk-and-return.asp

there is a positive correlation between the amount of risk and the potential for return. Generally, a lower risk investment has a lower potential for profit. A higher risk investment has a higher potential for profit but also a potential for a greater loss.

https://www.hsbc.co.uk/investments/is-investing-worth-the-risk/

Risk and return are closely linked

You can’t have one without the other. The lower the risk, the lower the potential returns. The higher the risk, the higher the potential returns.

There are various formulas. What's important, they include 'risk-free rate' and 'portfolio return' along with other factors describing uncertainty/risks.