Mortgage Overpayment Vs Savings?

adamck

Hi All.

Im in a predicament, although its a good one, but I need help working out which is financially the better option.

Im 37, have 3 kids, no credit cards, no other debt, no finance, no phone contracts etc. and im generally quite sensible with money.

I currently have a £210,500 mortgage on a ~£500K house with HSBC (~42% LTV) which has 3 just over years left at 1.09% 
My monthly payment is £1003/mo and I earn around £3600/mo.

I also have a chip saving account with £16K in earning me 3.71% interest.

Im currently overpaying £100/mo off the mortgage and £100 going into the savings account.

My query is:
A ) should I just put £10K into the mortgage to overpay and reduce it whilst im on a low rate?
B ) continue with the mix I have now where im overpaying a bit, making interest on the savings and compound interest on the £100/mo into that?
C ) Keep 10K in the saving and pull £5k out and put that into the mortgage?
D ) something slightly different?

I want to make the most of the high interest rates on the savings but also the low rates on the mortgage knowing that the rates on both sides may not last.
I know my mortgage will be shooting up higher in 3 years time, but anything can happen in 3 years.

What's the most optimal way to make the most of the situation?
I know a lot of it is crystal ball assumptions, but im very sceptical that ill see a 1.09% rate again.

My ultimate goal is to pay off my mortgage as soon as I can, whilst still enjoying some luxuries in life.

I also don't want to be in a position where I have 0 savings as I like to have a bit of a rainy day fund for emergencies, which I currently have around 7K outside of the above.

Thanks for any advice / info

MorningcoffeeIV

D) stop overpaying and put the money in savings for as long as you can beat your mortgage rate.

Make sure it's accessible for when you come off your fix.

adamck

MorningcoffeeIV said:

D) stop overpaying and put the money in savings for as long as you can beat your mortgage rate.

Make sure it's accessible for when you come off your fix.

My savings is instant access, so no worries about accessing the cash when I need it.

kimwp

Put the money in savings in order to put it to the mortgage if the mortgage rate goes up when your fix ends. 

NB, this question is better placed on the mortgage free wannabe board, this board is for people with other debts.

Floss

And maybe consider putting £10k into a higher rate account to make it work harder?

adamck

Floss said:

And maybe consider putting £10k into a higher rate account to make it work harder?

Ive only see about 4% from higher interest account which are locked in.
Don't see there's a huge benefit to this, but I guess every little helps.

TheAble

There's little point overpaying 1% debt when market rates are around 4.5%. Invest at the higher rate for now and then if you want to overpay do it in a lump when your cheap fix ends.

Floss

adamck said:

Floss said:

And maybe consider putting £10k into a higher rate account to make it work harder?

Ive only see about 4% from higher interest account which are locked in.
Don't see there's a huge benefit to this, but I guess every little helps.

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

kimwp

Put any new savings into regular savers - they give the highest interest. You can also drop feed in the money from your savings. The regular saving page on this website is a good resource.