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DON'T believe the fake 'Martin Lewis' or 'MSE' ads |
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Martin: "With interest rates likely to rise, should I save or overpay my mortgage?" It's thought very likely in November, the Bank of England will increase the base rate from 3.75% to 4%. In fact, the market is currently pricing in that the rate will rise four times over the next year. As new fixed mortgage rates depend on the market's view of future rates, fixes are getting costlier. A couple of months ago, the cheapest two-year fix was 4.1% - now it's 4.8%. Plus, tracker and variable rates are likely to follow suit if the base rate rise predictions come true. No surprise, then, that one of the most common questions I'm asked at the moment from those with spare cash is: "Should I save or overpay my mortgage?" So below I've the eight key need-to-knows. Before that though...
The eight 'should I overpay my mortgage' need-to-knows...
1. Do you have more expensive card, loan or overdraft debt? If so, it's generally best to prioritise using spare cash to clear them instead - see Should I overpay cards & loans. Overpaying student loan debt is a much more complex decision - it depends on which Plan you're on and your specific circumstances See my Should I ovepay Plan 2 loans blog for some basics. 2. If your mortgage rate's higher than the (after-tax) interest on savings, overpaying adds up. Let's keep this simple... £10,000 saved at top 4.5% savings earns £450 interest (£360 for those who pay basic-rate tax on it), yet use it to overpay a 6% mortgage and it saves you £600 interest. So if your mortgage rate's higher than the after-tax rate you earn on savings, overpaying makes sense. Another way to think of it: it's like saving, tax-free, at your mortgage rate. Then again, if you're still on a legacy cheap mortgage at 1% or 2%, there's no point in overpaying that for now (see point 7). Use our Mortgage Overpayment Calc to see both the absolute gain and how overpaying compares to saving.
Or more recently WofC on X: "@martinslewis Overpay as much as you can. I'm on track to pay a 30 year mortgage off in 10 years. This will save me around £85,000 in interest." 3. What you compare matters! Ensure it's YOUR best possible mortgage vs YOUR best possible savings. If your mortgage could be better and you're free to move, check what the best rate you're likely to get is. Use our Mortgage Best Buys comparison for a benchmark, and free Remortgage guide for step-by-step help or speak to a mortgage broker. The same's true with savings. If your accounts pay a paltry rate, as far too many do, it's easy to ditch and switch (unless they're locked away in a fix). On lump sums, you can earn up to 5% in top savings, so that's what you should be comparing with. 4. TWO KEY CHECKS before you act. If overpaying looks a winner, check...
5. Borrowing over 60% of your home's value? It can pay even more to overpay. If you can save at a rate higher than your mortgage, use our Mortgage Overpay vs Savings Calc to see the exact cost. If the savings are only trivially better, and you're borrowing a decent chunk of your home's value, remember your Loan-To-Value (LTV) plays a big factor in the mortgage rate you can get. The lower your LTV, the better your deal - until it drops below 60%, where it stays the same. Overpaying to reduce your mortgage debt may lower the rate of future mortgage deals - see LTV thresholds which improve mortgage rates. With over a million fixed-rate deals ending this year, it's a consideration for many. 6. When overpaying, ensure it reduces your TOTAL MORTGAGE BALANCE. Overpay and some lenders just reduce your next or future monthly repayments. That may help cash flow, but you won't see a big reduction in interest. To do that you need to ensure overpayments reduce your mortgage balance while keeping the same monthly repayment. This has the practical effect of helping you clear your mortgage sooner, resulting in an interest gain. So, when you overpay, tell the lender you want it to reduce the capital owed which effectively reduces the mortgage term, not the monthly repayment. This way you'll be mortgage-free quicker. If a lender makes this difficult by lowering your monthly repayments, just keep paying what you were or more (effectively overpaying each month) to have the same impact. To be clear: I'm NOT saying ask to reduce the term, that may need an affordability test - see my old Decrease term v overpay blog. 7. If saving beats overpaying your mortgage, save the right way. There are still many people with super-cheap 1% or 2% mortgages, who right now are far better off saving than overpaying. For many others, it's a closer call. Yet both should be aware that at some point, that deal will end and your new mortgage rate could be far higher, meaning the equation changes. So if you are saving, having that money available and liquid (spendable) when the deal is coming up for renewal is important, as it means you can use it to reduce your borrowing at that point if needed. To do that, you'll want money in easy-access savings then - this doesn't mean you can't use fixed savings before, just ensure they mature before your mortgage fix ends. 8. What about overpaying the mortgage vs investing? I'm asked this far less often, which is a shame. More people should consider investing money unneeded for 5+yrs rather than saving it (see my beginner's investing guide).
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YouTube LIVE 7.30pm Thu. Ask Martin Anything (within reason)! Subscribe to his YouTube channel so you can ask your questions (turn on notifications to ensure you don't miss it). You can also watch back afterwards. Submit questions early. New. Bought or leased a NEW car or van 18 Oct 06 to 6 Sept 15? You may be due a share of £56m! Millions may be due small payouts of £25+, which have just been agreed in a group legal case. It's all about vehicles shipped to the UK, which is many of them (you were probably unaware). Full info & how to claim in our Car shipping compensation guide. Related but separate: Car finance mis-selling compensation.
Martin 45s vid. "You can't leave a pension in your will!" Watch his important pension info courtesy of This Morning. £300+ Dyson V10 cordless vacuum £183 refurbished by Dyson itself. MSE Blagged. 1,400 codes. Our code takes £137 off, taking it to £183 (Dyson sells it for £320). Has a 1yr manufacturer guarantee. Dyson with deals Ends 9pm tomorrow. FREE £50 of shares when you invest £200+. 2,000 codes left. Until Wed night, newbies to huge global investment platform IG* can get £50 of free shares in random big US firms. a) Open its Share Dealing account using code MSE50. Then either use it or open a shares ISA or SIPP in order to... b) Deposit and invest £200+ by 9pm tomorrow and keep it invested till 28 Feb 2027. IG offers a wide range of shares and ETFs with no platform/trading fees. You'll receive and can then sell or keep the shares by 31 Mar 27. Full info: £50 free shares. £397 of beauty in £75 M&S Advent calendar. Mega popular with MoneySavers - and Sparks members (free to join) get early access from Thu. Peek inside the M&S beauty Advent calendar. Related: M&S sale BOOSTED up to 70%. Ends Thu. 150Mb Vodafone broadband under £19/mth. It's a 2yr contract - you pay £21/mth (£24.50 from April 27, £29/mth from April 2028) and it'll email a choice of a £140 voucher for Amazon, Tesco, M&S etc within 4mths of signing up (do check your junk folder). Factored in, it's equivalent to £18.67/mth over the contract. Full Comparison: Cheap Broadband tool. Halifax customer? Your online/app banking will be axed next month. Here's what you need to know.
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The cheapest personal loan is 5.9% - but for how long?With strong signals UK interest rates will rise, if you need a loan, sooner is safer Almost all UK personal loans are fixed rate, so the interest rate's locked in for the full term. And as Martin's explained with mortgage fixes above, that means that how much lenders charge for new loans depends on the market's view of future interest rates. With the mood music blaring that UK rates are likely to rise soon, it's probable loan rates will follow suit - either with rate rises (we've already seen a few) or tightening lending criteria for the cheapest deals. So if you need to borrow, sorting sooner is likely safer. Our Cheap loans guide will take you through it, but here's key need-to-knows and best buys...
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£35 Calvin Klein prescription specs or sunnies (normally from £95). MSE Blagged. £35 for the basic set-up - you can pay to upgrade lenses etc. Via SpeckyFourEyes code. One week left. Easy FREE £240 cash to switch bank - biggest bonus of the year so far. For the next week, new switchers who apply to the fee-free Santander Everyday account* get a FREE £240 cash. Full info in Top bank accounts. 5p/litre off petrol or diesel when you spend £40+ at Asda (excl. Scot). Valid at 300+ petrol stations. See 5p/litre off fuel. Related: Find the cheapest petrol or diesel in your area. Free NHS flu vaccine bookings open to over-65s from Thu. They're already available for pregnant women and children. See Free flu jabs. Not eligible? See where to get a cheap private one. |
AT A GLANCE BEST BUYS
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THIS WEEK'S POLL Have you haggled with Sky, BT, AA or any others in the last six months? Did you succeed? Whether it's digital TV, broadband, breakdown cover or car insurance, haggling can net you huge savings on all kinds of different products. And every six months, we try to gauge the success rates of those who have done it. So, have you nabbed cheaper prices, extra goods or better deals? Let us know how successful you've been. Vote in this week's poll. |
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MONEY MORAL DILEMMA Is it fair to ask my daughter to repay the money I gave her while in a controlling marriage? My daughter and son-in-law were heavily in debt 20 years ago. I paid almost £6,000 off one of their credit cards and gave them substantial sums to help elsewhere. They've since divorced and their home is now on the market, and I've discovered her ex-husband controlled everything and lived like a playboy. I'm nearing retirement, and that money would be a great help to me - yet they've never tried to repay it. Given that my daughter's been through a hard time, walking out of her home of 28 years with her belongings in bin bags, would it be unreasonable to ask her to pay me back from her share of the house sale proceeds? Enter the Money Moral Maze: Is it fair to ask my daughter to repay the money I gave her and her ex? | Suggest a Money Moral Dilemma (MMD) | View past MMDs Affected by the issues raised in this MMD? See Martin's money, relationships & financial abuse blog for help & support |
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MARTIN'S APPEARANCES (WED 30 SEP ONWARDS) Wed 30 Sep - Good Morning Britain, ITV1, 9.20am |
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What exactly will happen to interest rates? And what it means for mortgages, savings & more.
What should every teenager know about money? | Are Octopus Agile & Tracker still worth it? | Can you stooze with other 0% finance?



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