Paying off my fixed term mortgage pros cons

Marineboy1961

Hello 

My dilemma is do I pay off my mortgage in total and free up more disposable monthly income ? Or pay off max sum of 20% per year without redemption fee... 

I have a fixed term mortgage with 1.19% at £619 per month due to end Nov 2026 then goes back to variable rate. Current balance is £46,000. 

I am a 64 year old on £24k pa current NHS employee + £10.5k pa DB pension

Savings 
£41,487 ISA 4.9% Moneybox.
£8,800  Instant savers 4.5% Money box
£4,000 current account 
£157,000 DC pots 

The rate is favourable with savings versus fixed rate mortgage at 1.29%, however the interest earned is less than the money I am shelling out on the mortgage.

Would really appreciate thoughts from you, many thanks 
P
  

 

El_Torro

In the current environment it's clear that you're better off putting any spare money into savings and not overpaying your mortgage at all. It's very easy to beat an interest rate of 1.29%.

You say that the interest earned is less than what you are paying on your mortgage. I guess you're including the capital repayment part of the mortgage in that statement. The important part is the interest you are paying, not the capital. The capital has to be paid back regardless. 

In November 2026 you can pay off a big chunk of the mortgage before going on to a higher interest rate, using the savings and interest you have accumulated. 

Marineboy1961

Thanks for that prespective, on reflection its true to say I am paying virtually all capital back and I can keep on saving a little with my current income into money box ISAs . I also have 157k DC pots which I am planning to either transfer into my NHS pension or perhaps spread between NHS and another annuity drawdown . Much to learn ... thanks once again for your prompt response ! P

seventh88

I agree with @El_Torro - don’t overpay now, save as much as you can before your fixed rate ends. You will be able to pay off as much as you want at that point (like in the last two weeks before your fix ends, or at the very point when it ends) without penalty or fees - call your mortgage provider to check, but mine allows me to do this.
i also work for the NHS. Re your NHS pension, your Trust should usually offer sessions where you can book a one to one appointment with a member of staff from the pensions team, I’ve been to these, they were really helpful. I don’t think they can give legal financial advice, but they can certainly show you different options and different outcomes, and this can help you make an informed decision. Call the pension service directly if you’re not sure how to access this in your trust (ours only does it periodically and they get booked up fast).