It is that simple though in most cases, obviously, if you're not getting the returns on the savings then it doesn't apply.
The point is to compare the returns.
Mortgage Rate Rises
- Thread starter glenimp617
- Start date
It is that simple though in most cases, obviously, if you're not getting the returns on the savings then it doesn't apply.
The point is to compare the returns.
Soldato
Very similar position and absoloutely the right train of thought.
Soldato
For those numbers I agree you’re not going to see a great deal of difference no matter what you do. My mortgage is sat at 1.25% and my savings are at 5.1% so I won’t be making any over payments just now!
That is not true at all.
You are right that most mortgages only allow 10% of the current balance, as you have stated and that's how my mortgage with Halifax works.
But my mortgage with Skipton is 10% of the original loan amount. I am sure other lenders will have this rule also.
Soldato
Ah there's far worse off than me. Thankfully I've always been frugal and a saver so I have good buffers in place incase anything like that happened.
I hadn't actually considered using the interest from savings to offset the increase of mortgage payments come deal renewal time. Although knowing my luck the savings interest rate will probably be crap come next December!
I'll just continue saving into ISA/savings for now, and see how things are come the end of next year.
You'll have a massive pension which is taxed at high rates on withdrawal.
Associate
Yes, but if you lose your job for any health reason you eat away at your ISA.
Don't forget the money gets taxed now, while the pension does not.
Then take into account tax free that your getting in your pension will generate higher returns. Interest compounding With £100 compared will return more than £ 48 after tax.
Plus taking out pension payments monthly
and just taking out your base and then using your 25% combined for monthly payments could reduce you tax bill.
Sorry just woke up.
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Soldato
I spoke to HSBC, and good news is apparently, when I did the online switch in January, I had already agreed/confirmed the lower rate offer. He said he can see it on my account. WHen I queried why my rate offer letter isn't as clear, he didn't know for sure; said maybe because it was like a renewal. But he did say that the email I got this week reminding me to renew my rate was an error, sent to many customers. So I've got to trust his word, and check my statement next month, when my DD payment will change.
I prefer some in pension some in isa.
They are both useful tools.
Pension gathers 40pc tax rebate but would be taxed on anything over personal allowance at drawdown and it's locked away.
ISA gets full tax but you can use if for emergencies, life changes etc and isn't taxed on withdrawal.
Couldn't imagine doing one or the other.
They are both useful tools.
Pension gathers 40pc tax rebate but would be taxed on anything over personal allowance at drawdown and it's locked away.
ISA gets full tax but you can use if for emergencies, life changes etc and isn't taxed on withdrawal.
Couldn't imagine doing one or the other.
@jaybee that seems to be more the differences that I saw per year (those numbers are not ours, mind 
) although unsure if you've done the savings at 2% by mistake? Either way if you're talking ~£150 difference per year I'm not sure that warrants the hassle of maintaining an account, doing the admin etc. I'd rather just overpay and forget about it.
The comparisons of over 25 year period are just nonsense because you can't possibly take into account the mortgage rate changes and savings interest rate changes.
) although unsure if you've done the savings at 2% by mistake? Either way if you're talking ~£150 difference per year I'm not sure that warrants the hassle of maintaining an account, doing the admin etc. I'd rather just overpay and forget about it.The comparisons of over 25 year period are just nonsense because you can't possibly take into account the mortgage rate changes and savings interest rate changes.
Soldato
Highest effective rate should win, but if they're close, then overpaying mortgage is easier to manage.
Some caveats though, money is tied up in the mortgage, and you have limits on how much you can overpay usually.
Whilst my savings rate is much higher than my interest rate on mortgage, it makes more sense to throw into savings and pay off later.
Some caveats though, money is tied up in the mortgage, and you have limits on how much you can overpay usually.
Whilst my savings rate is much higher than my interest rate on mortgage, it makes more sense to throw into savings and pay off later.
@jaybee that seems to be more the differences that I saw per year (those numbers are not ours, mind
The comparisons of over 25 year period are just nonsense because you can't possibly take into account the mortgage rate changes and savings interest rate changes.
Of course the 25 year is applicable.
How else can you compare?
Probably because of rate uncertainty, the quirks of ultra low mortgage rates and higher savings rates will quickly fade. I do find it amusing people will berate banks etc but when they have a chance to give them less money its too much hassle.
Something about making hay etc.
You could lock in a long term rate with gilts for example on the savings side if you had a lump sum so its not all crazy talk on the longer time scales either. I'll admit though, this is more admin. (10 mins work).
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@jaybee that seems to be more the differences that I saw per year (those numbers are not ours, mind
The comparisons of over 25 year period are just nonsense because you can't possibly take into account the mortgage rate changes and savings interest rate changes.
The interest was done at 5% as you requested. It's more like £180 a year. What if you do a 5 year fix though? More significant then. It literally took me about 10 minutes to apply for an online savings account. Was up and running within days and then went into my bank to setup standing order. Done.
The point was more to show that it is in fact better. Whether you value that amount is up to you. It will obviously be less if comparing say 4% vs 5% or something like that.
It's applicable, but it's not a real world example because nobody has the same mortgage rates and interest rates over that period. Over the last 25 years the BOE rates have gone from 6% in 1999, all the way down to 0.5% in 2009, and back up to 5%-odd whatever they are now. How can you do the sums on what you don't know for the next 24 years of your mortgage?
Besides, if you want to calculate it over the whole period you need to take into account your max overpayment amount as previously mentioned which is generally 10% of your loan. So you have to "reset" your sums every year as you take out that amount to overpay. Some people won't actually be saving more than they could feasibly overpay anyway, in which case you may as well be doing your sums year on year basis. In which case as above if you're talking about £100-200 difference per year it might not be worth the hassle.But then like I say above it's doing your max overpayment every year, changing savings accounts every year to maximise the rates available, moving that money. Then doing these sums every time your rates change on the mortgage or savings. Yes it's not that much admin in the grand scheme of things but it's tedious nonetheless.
Each to their own. We're only going to go round in circles on this. We've done the sums, double, triple checked them separately and are pretty comfortable that the difference gained is not worth the aggro in our particular circumstances. We spent years and years and years admin'ing savings accounts, moving around for the best rates etc. It's a pleasure to not have to do that for once, and simply start attacking this big 'ol mortgage we have instead and watch it go down.
Associate
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You have to also take into account that you can take 25% of pension pot tax free when doing sums...it's all tricky and a mix is good but that 40% back plus any NI your company gives back is a big win for pension...as at draw down you are most likely only going to be in 20% tax bracket...