Overpayments before Fixed Term ends?

closec

Good morning, 

I currently have a fixed mortgage of 1.6% , that does not expire until July 2026, with the remaining term being just over 11 years. Obviously, current saving rates are more beneficial than making overpayments. I am able to make 10% mortgage overpayments per year, without charge.

My question is - should I save until the mortgage fixed term ends, then make a 1x 10% overpayment? Or make annual overpayments during the fixed term?

Thanks 

Herzlos

I'd put it all into savings and then pay it down when the mortgage deal expires. If you go from fixed to standard rate, then there will usually be no overpayment charge.

But it also depends on what deal you get from July 2026 and how much overpayment is allowed.

dimbo61

So how much can you save each month compared to your mortgage debt ? 
Now you might be better saving up all year and making an overpayment just before the end of the year.

jimjames

dimbo61 said:

So how much can you save each month compared to your mortgage debt ? 
Now you might be better saving up all year and making an overpayment just before the end of the year.

If you're doing that you might as well just wait until the fixed term ends and dump it all in to benefit from the higher rate on savings

Bobby_Peel

Sorry to jump on the back of this thread but rather than start a new one...

Mortgage is currently at £93018 and my current monthly mortgage payment is £475.99 and I've been paying £700.99 each month (£225 overpayment)

As I'm currently on 0.99% which runs out on 31st of December, I want to make up the different of the 10% overpayment allowance with a lump sum.

By December I would of paid 2925 in overpayments. 

At want point do they calculate the 10% figure? As in December my mortgage amount was £96,753. Is it on this or at the last month of the term?

Thanks

IdrisJazz

Now is a terrible time to overpay on your mortgage, if you have a cheap fixed rate (<2%).

Interest rates may reach 5% very soon for savings accounts. If you have a mortgage at 0.99% (as the poster above does) you could literally make your overpayments work 5 times harder by putting it in savings instead.

At the end of your fix period, you will have more in savings than the extra debt you would have knocked off your mortgage. You then remortgage at a level that factors in the money you hold in savings - you don't have to make an overpayment at all. (For example, fixed rate ends with a debt of £100k. But you have 20k in savings. You simply take out a new mortgage for 80k.)

This may be a once in a lifetime opportunity to make use of such a disparity in mortgage and savings rates. Make the most of it!

NB Some people struggle with the possibility of using the savings for something else instead, but that is totally in your control, and you can always choose fixed rate bonds where you have no access to your money.

We all want to see our mortgages reducing as rapidly as possible, but it comes down to mindset - see your savings as a ringfenced offset account.

closec

Thanks for all of the advice above. Whilst I fully appreciate that savings rates are higher than my current fixed mortgage rate, and making overpayments is not advisable.  (I am currently saving not overpaying)

Before posting the question, I had felt that taking advantage of a 10% overpayment per year would be best - and I hadn't thought of saving for the remainder of fixed term, then making a bigger overpayment, when the 10% cap will not exist.

Thanks all.

chanz4

Bobby_Peel said:

Sorry to jump on the back of this thread but rather than start a new one...

Mortgage is currently at £93018 and my current monthly mortgage payment is £475.99 and I've been paying £700.99 each month (£225 overpayment)

As I'm currently on 0.99% which runs out on 31st of December, I want to make up the different of the 10% overpayment allowance with a lump sum.

By December I would of paid 2925 in overpayments. 

At want point do they calculate the 10% figure? As in December my mortgage amount was £96,753. Is it on this or at the last month of the term?

Thanks

jan 1st if halifax

Newbie_John

closec said:

Thanks for all of the advice above. Whilst I fully appreciate that savings rates are higher than my current fixed mortgage rate, and making overpayments is not advisable.  (I am currently saving not overpaying)

Before posting the question, I had felt that taking advantage of a 10% overpayment per year would be best - and I hadn't thought of saving for the remainder of fixed term, then making a bigger overpayment, when the 10% cap will not exist.

Thanks all.

That's not that simple.
Please someone correct me if I'm wrong but..
If in 2026 you hit another chaotic year like this one when mortgages jump from 1% to 5% you would like to consider doing a product switch as early as possible (6 months in advance) rather than waiting till the end date, switch to the standard rate which is much higher, do a big overpayment and then remortgage/product transfer. 

Also tax complications, going over £1000 in interest for lower tax payers would be quite easy £16k on 6% will get you there, and if you earn £49k it may take you to higher rate and mess up even more 😎. So ISAs, Premium Bonds and similar tax free savings are advised if you at risk.

But anyway, it's save to say in your case to save till late 2025 - then decide on market situation if it's worth doing a last minute 10% overpayment for that year which could move you to better LTV and then accept best product transfer offer in February.. too many unknowns, please revisit this topic in December 2025 😌