5 yr fixed till 2027..1.44%.. overpay or put money into savings?

Newbie_John

If you put it to 6% fix for 2 years and overpay then rather now - you'll be £80 better off.

But usual suspects to consider - tax, are you close to 60% LTV, likeliness of spending this money on something else.

**woody123**

I’m in a similar position to you Welshlad.

I am on a fixed til April 2027 @ 1.64% I was able to take advantage of this offer in December 2021 before my last fix ended in April 2022.

I did make the mistake overpaying for the first couple of months but am now saving and getting at least 4% to hopefully pay my off my mortgage in April 2027 when my fix ends.

rockers

Well done on getting that low mortgage rate. I managed to fix at 2% till 2026.

I think the bottom line is that in a high inflation environment, don't pay off low cost debt earlier if you can help it. If you can put savings into a high interest account - that would be preferable.

You would be paying it off now with ££ that are worth more, whereas in a few years those same ££ will be worth less.

From my parents' day - but basically inflation (though not really a good thing overall for the wider economy) can erode debt. The higher the inflation, the quicker the debt is eroded.

Seeing what was coming, I took out a further loan at 1% interest to have some work done on the house. So I will be paying it back with £££ that are worth less over the next few years.

Obviously making sure that you can repay any extra debt. 

jimjames

alanyau88 said:

 You could even go for a 3 year fix rate at 6.06% with Investec.  If you have over £20,000 in savings accounts already, then put the £200 into a 3 year fix Cash ISA at 5.55% with Virgin Money.

Just to pick up on this one, you can't pay into a fixed rate account each month, it's for lump sums in the first month only. The 4% account the OP has sounds like the ideal place to put money unless rates increase.

jbrassy

This is a bit of a no-brainer. You should be using any excess money to save rather than overpay on your mortgage. 

The real value of your mortgage is currently decreasing (by over 7% a year based on the current inflation rate and your mortgage interest rate). 

You can easily earn over 4% interest on easy access savings, and over 6% if you lock it away for longer. This far exceeds the interest on your mortgage. This also has couple of advantages:
1 - if you need the savings for an emergency (e.g. you need a new car or boiler), the money is available. If you plough it into the mortgage, you can't get it back (until you sell the house).
2 - once your fixed rate comes to an end in 2027, you can use your savings to pay down the capital on the mortgage when you need to switch deal. In 2027, the interest rates on mortgages may be a lot higher than you are currently paying, in which case it would make sense to pay down the capital on the mortgage to reduce future interest payments. When I came off my fix in January this year (previously 1.89%), my partner and I used our savings we'd accrued over 5 years to pay down the capital before we moved to our new mortgage (current interest rate 5.25%). 

alanyau88

jimjames said:

alanyau88 said:

 You could even go for a 3 year fix rate at 6.06% with Investec.  If you have over £20,000 in savings accounts already, then put the £200 into a 3 year fix Cash ISA at 5.55% with Virgin Money.

Just to pick up on this one, you can't pay into a fixed rate account each month, it's for lump sums in the first month only. The 4% account the OP has sounds like the ideal place to put money unless rates increase.

Well pointed out as I don't use fixed rate savings accounts as you're actually losing purchasing power of the money based on the inflation rate we have.  However why can't he go with a regular saver and once that expires after 12 months, to put the lump sum of those savings into a fixed rate?  Majority of regular saver accounts have a much higher rate than the 4% you pointed out and can pay in £200 a month?  

Newbie_John

You lose purchasing power on items affected by inflation - let's say food etc. If your mortgage payment is constant for X years then you're not losing anything..