Overpay mortgage or put into savings?

[Blinkonce]

Please can someone help me as I'm pretty bad at maths and I don't know which is better!

My hope of moving to a lowish rate 10 yr fixed mortgage early in November seems highly unlikely now (was waiting until then on advice of mortgage broker and company, due to high exit fees because noone expected what's happened over the past few days), so now I'm thinking what can I do to soften the blow of a potential 8% interest rate when our fixed rate ends.

We have 2 mortgages on our property - both 1.89% until Nov 23. We owe £133,000 for 26 years on one, and £11,000 for 10 years on the other. What would make the most difference - overpaying what we can every month from now (up to the limit we are allowed), or sticking the money in a 3.5% savings account for a year and using the lump sum to pay off a bit chunk when the fixed rate ends? We have £10000 savings and then whatever we can scrape together as extra each month. Or should I invest it elsewhere (if so where and how?)

Have you actually found a savings account that pays 3.5% for that some of money for just a 1 year fix? The highest rates I see are for longer fixes. And what if you feel you need the money and dip into it?

I think - given how things are - I would focus everything on paying off as much of the mortgage as possible before the higher rate arrives.

whether to overpay or invest is an eternal question - and for short timelines like yours - the answer is almost always to overpay as it’s too short term to ride out the vagaries of the stock market. But whether to overpay or to save (not invest) depends on your exact circs and in this particular case you may wish to run some overpayment calculators to see which leaves you better off and which doesn’t tempt you to dip into savings…

About your investment question - do you have a long enough timeline to ride out market fluctuations when they inevitably happen (like right now) or will you need the money at a particular point and then if things are on a low you’ll lose out? What’s your knowledge of stocks and shares and what’s your timeline? Investing is usually best done slow and steady over a long ish period of time. If you need the money at X particular point in the short term - I don’t think investing is quite the answer.

Which savings account is giving 3.5% please as I’m after a savings account

NatWest has a £175 switching offer with a 5% regular saver linked to the current account.
T&C's apply.

The Natwest account you can only save a max of £150pm to a maximum of £1000, then the interest rate drops.

I found the 3.5% on moneysavingexpert I think, will double check later. I know nothing about stocks, shares etc. I think we are going to overpay as much as possible. Thanks for all your replies!

It's just basic maths...3.5% interest is higher than 1.89% interest.

Let's say you had £1000 to save or overpay. If you saved it you would have £1035 by the end of one year, if you overpaid it would be £1018.90. As the 3.5% is a risk free account you'd be silly not to do it this way and then use the money saved as a lump sum to reduce your mortgage at the end of its current term.