Dude if the savings rate is HIGHER than your interest rate, the sums are done/finished/complete.
Mortgage Rate Rises
- Thread starter glenimp617
- Start date
Dude if the savings rate is HIGHER than your interest rate, the sums are done/finished/complete.
Soldato
10 of original is very common, Nationwide for example is 10% of original
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.
Even if overpayments vs savings is similar, savings is more flexible and arguably easier admin if you have to make any changes. With mortgage payments, I have to phone HSBC to make any changes. So perhaps 10 minutes in queue and then talk to someone. If I want to change my savings amount, I can do it in the app in a couple of minutes. Besides, with savings if an emergency comes up, I can take the money straight out. With mortgage overpayments it's gone into equity.
Dude if the savings rate is HIGHER than your interest rate, the sums are done/finished/complete.
Yeah. I just changed the interest rate in the above spreadsheet example to be 2% overpayments vs 2.1% bank savings. Everything else the same. Bank savings wins over the 2 year period by £11.79.
didn't know it was even a thing haha
Soldato
Typically (but its not an exact rule) the terms are better with Building societies than banks.
Banks tend to have the terms that are worse, like Santander are really poor compared to just about everyone, most people don't look at these and pick the lowest payment, hence saving a few quid a month can result in terms lost that are worth thousands potentially.
ERCs, additional repayment limits, limitations in regards overpayments, portability etc.
With our mortgage lender (well known building society) we could change our overpayments online or in the app in about 5mins. Horses for courses.
EDIT: @jaybee I don't suppose you'd care to share that sheet? It has been a while since we did our sums, I'm sure the savings rates are higher now so it'd be interesting to see if the gains outweigh the effort.
Last edited:
Soldato
Same with our mortgage lender, first direct. Payments are set up as a standing order so easy to adjust, they don't seem to care what I pay back each month and no limits on over payments.
If I get time I will knock up a more user friendly version and share it, where you can populate your info in fields at the top then get a projected comparison.
Are there any other comparison tools which would be of benefit to anyone? I think there are already calculators and tools out there for this kind of thing anyway really?
I'd say only admin is making sure savings + mortgage comparison is done roght/on time.
Ie I know my mortgage is now locked for 5 years at 1.9.
If rates go. Up like they have. Jump on a fixed term isa/bond that ends at renewal and utilise it.
Its a bit of admin.. Whether it's worth the time or not.. Depends on individuals.
Ie I know my mortgage is now locked for 5 years at 1.9.
If rates go. Up like they have. Jump on a fixed term isa/bond that ends at renewal and utilise it.
Its a bit of admin.. Whether it's worth the time or not.. Depends on individuals.
Don't! Just don't!
How does that work? Is the answer compatible with GSCE level C maths?
Ah nice, I didn't ever see that savings comparison part before. Not sure how long that's been around.
at least a year
As above it’s not massively helpful for comparing your options at certain points. IE we have 3 years left on our fixed rate so we’d either overpay every month until then, or save until it ends and dump it in. I can’t figure out a way of using that tool to tell me where we’ll be at, at that point.
Punching in a mortgage rate, savings rate and 20 year term isn’t particularly helpful for anyone is it, as those rates will change massively as time goes on.
use this spreadsheet: https://www.locostfireblade.co.uk/spreadsheet/Index.html
We are looking at our mortgage options and are stuck between a fix and a tracker:
£605k mortgage (in the south
)
£265k equity
Fix: 4.57% 2 years @ £2888 and £1k product fee
Tracker: 5.40% 2 years @ £3208 and £1.5k product fee
With the fix, it is obviously fixed for the period and if BoE base rate drops by a decent amount, then we will be disappointed and stuck on a tracker with an ERC. However, the tracker would take advantage of any base rate reductions. The fix is around 4k more expensive assuming the base rate slowly drops to 3% over the term. The other option is a fix with a lender that allows a new product switch to be fully applied at the 18 month point.
Where do we see the base rate going? The estimates seem to be changing almost daily!
£605k mortgage (in the south
£265k equity
Fix: 4.57% 2 years @ £2888 and £1k product fee
Tracker: 5.40% 2 years @ £3208 and £1.5k product fee
With the fix, it is obviously fixed for the period and if BoE base rate drops by a decent amount, then we will be disappointed and stuck on a tracker with an ERC. However, the tracker would take advantage of any base rate reductions. The fix is around 4k more expensive assuming the base rate slowly drops to 3% over the term. The other option is a fix with a lender that allows a new product switch to be fully applied at the 18 month point.
Where do we see the base rate going? The estimates seem to be changing almost daily!