Pay off mortgage or invest?

JohnWinder

If its currently on a good fix, less than the interest you'd get from a savings account, it makes zero sense to pay it off.

Has that accounted for paying tax on savings account interest?

If you can earn more money than you'll save in interest, then its worth saving or investing.

It's a big 'if' when we consider investing, given the distribution of returns on some investments.

When interest rates were really low, I was paying less than 1% on my mortgage. There was no sense in paying it down. Now interest rates are higher again, it makes sense

It would be nice to see a qualitative analysis of this, as clear as it is when the differences are that stark. Wouldn't financial advisors do that sort of thing?

Ivkoto

If you work up to your state pension age, then you have around 24 years to build a good pension pot. It obviously depends how much you contribute, but the time is your friend.
As you probably know, to benefit from the compounding you need a long time horizon, unless you start with a big pot now, which makes big difference compared, when starting from scratch.

If it was me, I would never put more than 20% of the spare cash for mortgage overpayment and I will put all of the rest in investment.

Niv

I have done a blend.
I have upped my pension contribution to 15%, with my employer adding 7% gives me a reasonable 22%.
I overpay ~£200 on my mortgage, One reason I like this is that if/when I have to fix at a higher rate in future I already have a 'buffer' and can choose to use that to absorb any rate rise. Currently mortgage rate is 1.2% until mid 2026.
I have a lump sum invested in an ISA
I have a few savings accounts to give me some instant access cash when needed for large purchases / home improvements.

If I feel that my cash savings are growing more than I need I will likely look to increase pension contribution further as this is via salary sacrifice so has a tax benefit. 

brucethefish

Thanks for all the replys

At the moment it is 1.99 until September 25, so all the savings are earning around 4.5 - 5%

Hoenir

brucethefish said:

Thanks for all the replys

At the moment it is 1.99 until September 25, so all the savings are earning around 4.5 - 5%

Unfortunately likely to be considerably higher than 1.99 in 2025.