£49k mortgage - Fix, Tracker or just pay it off?

Cahoot_hater

Hi,

Just looking for a bit of advice on whether it’s worth exploring a tracker or offset mortgage in the current climate.

My 5-year fixed deal comes to an end in February 2027, and I should have around £49k left on the mortgage at that point.

Originally, I was thinking of just clearing the mortgage completely once the fixed period ends. However, my wife will need a new car in the not-too-distant future, so I’m now thinking of putting £31k towards the mortgage and leaving around £18k outstanding.

The current fixed-rate deals seem quite expensive compared with the 1.54% rate I’ve been on, so I’m wondering whether it might make more sense to look at a tracker or possibly an offset mortgage rather than fixing again.

I’ve never had either of these types of mortgages before, so I’m not really sure what I should be looking out for or whether there are any downsides I might be missing.

Even if I remortgage for just £18k, I’ll still have enough savings left over to clear the mortgage completely if I needed to.

Or should I just redeem the mortgage completely and then put the money I would have been paying towards the mortgage into savings for a used Ford Puma, and once I (or the missus ) have saved enough, use that towards the new car?

Part of me is saying just pay the mortgage off and be done with it, while the other part is saying put £31k towards it and keep the £18k mortgage for now.

Interested to hear what others would do in this situation and whether I’m missing anything obvious.

Yorkie1

There is a minimum amount which a new lender is likely to be willing to approve, I think, so if you are considering doing a large overpayment to reduce the amount outstanding at the point of the new product, bear that in mind; you may therefore be limited to a product transfer with your current lender.

It is often advised to keep at least 3 - 6 months' expenditure in easy access savings for emergency use. If your wife's car is likely to need replacement in the fairly near future, I would suggest ignoring the money for that, when assessing your level of easy access funds.

Many people value the psychological safety of paying off the mortgage, but the decision needs to be taken in the round.

Bigphil1474

The usual wisdom is to pay off debt which has a higher interest rate than your savings, and to not pay it off if it is lower than your savings.

You may struggle to get a mortgage for £18k. You don't have to take out a new product either. See what the SVR is for your current lender. The difference between a 6% SVR and say a 5% fix in year 1 is only £180 a year, on an £18k mortgage. You can pay off what you want when you are outside a deal so it might be worth staying on the SVR for a but to see which way you need to go. This being MSE, obviously your wife doesn't 'need' a new car, but are any of the likely car places offering better deals on finance that may be cheaper than your mortgage - maybe pay off the whole mortgage and buy the car on a finance deal, if cheaper? I think Skoda and Toyota are offering 0% deals but don't know the details.

saajan_12

The main question is how quickly do you save up the cost of a new car?

There's little point in paying the same for a mortgage as what you get in interest since at your numbers, the savings interest may start to be taxable. The only times it really makes sense is

• if you'd instead invest the 50k and leave it untouched for 10+ years (whether in an S&S ISA or pension or general investment account).
• if you have an ISA allowance that'll otherwise go to waste and you expect you'll be maxing out in the next few years.
• if you can get a tracker rate which allows unilimited early withdrawals and no fee

I'd probably pay off all / most of the mortgage, just keep enough cash for a 3 month emergency fund and together with monthly savings, you'll have enough for a car in 1 year. Based on that if you'd be paying off more than half the mortgage, then just leave the rest on the SVR if its not too high, else find a tracker that allows early withdrawals.

Cahoot_hater

Thank you, some great advice and definitely plenty of food for thought.