Save money or throw at mortgage?

[YellowRedBlueGreen]

I hope to save as much money as I can over the next few years providing I don't lose my job or end up in bad health or whatever (touch wood). I'm fixed until 2026 so thankful for that... I have a savings account. I will always aim to keep enough in there for emergencies like boiler replacement house, car issues etc. Thousands not hundreds. But once that nest egg is above a certain level would I be better off building that savings account (with fuck all interest) or throwing everything I can at the mortgage?

I’d over pay the mortgage by whatever you are allowed to.

Right now I'd throw it at the mortgage. I just think we've seen the end of low rates and by 2026 you'll be grateful you did.

If the savings rate is lower than the mortgage rate isn't it better to pay off mortgage

Thanks I thought so too, I'm not very good with interest finance etc and everything is so bloody scary now x

Cold hard cash is losing value. So once you hit your emergency target I would, with advice, invest spare or pay off mortgage/debt.

Or increase pension contributions because you get the tax gain and company contributions added to those.

Check how much you can overpay. Fixed rate means they have already anticipated what you will be paying and will have done a swap to manage that. Some fixed rate products don't allow overpayments at all.

We've been mortgage free since 2008 and I highly recommend it - we had a couple of unexpected lump sums that helped clear it faster than we thought possible, but once we'd cleared credit cards, the money we'd spent repaying those went on the mortgage. Once I started, it became a challenge and I'm so glad I did it.

Martin Lewis always advocates to clear the mortgage asap.

I cleared mine nearly a year ago. Just as well in these dark days....

Target the money towards the highest rate, but be aware of limits on overpaying your mortgage if you're on a deal.

If your savings are earning 'fuck all' you can move them to get nearly 2% instant access, or use a regular saver for new money to get a higher rate.

Or if you have a lump sum, you should exceed 2% on premium bonds with average luck.

The rates on those savings products are higher than many fixed mortgage rates taken out in the last year or two. Some people got fixes below 1%, so in that case, you'll profit on savings and you can send them to the mortgage when your fix ends but before you sign up to another one.

Basic information missing here. What is your current mortgage rate? If it's less than the interest rate you can get on a savings account (and you can get over 3% on an instant access one at the moment) then you are better off putting it into a savings account and then paying it into the mortgage when your term ends

6-month savings and then overpay is commonly advised.

God knows what will have happened by 2026

Agree with everyone stating to put into savings if mortgage rate is below savings rate and wait until your deal is up and pay the lump sum off then.

Our mortgage rate is 1.95% ATM we need to save some emergency funds because our home improvements cost more than anticipated but once they're back we'll either be hammering off the mortgage or putting into savings dependent on rate.

Although we're slightly more complicated by the fact DH isn't paying into a private pension and he's nearly 50.

Look carefully at what the interest rate is on your mortgages vs a 2 or 3 year fixed rate ISA, which could be 3.5% interest......

Pay off your mortgage. It is a massive relief to know that your roof over your head is yours and no one can take it off you. I'd never go back to having a mortgage now.

My order is going to be:

• build up to 4-6 months expenses in savings
• any excess split between pension contributions (tax relief) and mortgage overpayment

weve just got a new 5 year fix so have until late 2027 before need to panic

@Ifyouknowyouknowyouknow I think we're going to do the same.

We prioritised pensions.

Our fix comes up end of 2023, currently paying just over 1%. Looking to build up a 'ringfenced' (i.e. we won't touch it) mortgage pot over the next year at c.3% to pay off a lump sum before we refix (already have 6 month emergency pot). Because of rates that will leave us slightly better off, but depends on your current rate.

we have an offset mortgage, so savings are offset against Mortgage anyway and you can overpay with no penalty. it is a great way to reduce mortage quickly if you have a savings each month.

If interest rates on your bank rise above your mortgage rate keep the savings. If your mortgage rate is higher overpay the mortgage.

But @RoachTheHorse borrowing rates are always higher than savings rates. It's how banks make money.
Or is my basic economics wrong?

Yes, you're wrong. Overall, borrowing rates are higher than savings rates, but it's often not the case.

Anyone who got a fix around a year ago could be paying under 1%. You can get around 2% on instant access at the moment, or more on a fixed or regular savings.

It depends when you fixed and at what rate surely. I'm talking about being in an existing mortgage fixed before the current hoo hah!

I suppose I was talking base rate. Of course there'll be lag in terms of rates fixed a couple of years ago