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It's not a huge sum, but I have an interest only mortgage and then some standalone investments (managed fund types) Total mortgage is about 145k of which I owe 115 with 30 already cleared by other savings, etc.
One of these matures shortly and will cover about 30% of the remaining mortgage capital. But of course thanks to the ongoing situation it has dropped a chunk of value in the last few months.
My plan was to pay off some of the mortgage and reduce the interest which is pegged to base rate plus 1%. It's an offset interest only mortgage too, so while it reduces the sum owed I can still get at it if needed. But I already paid off 30k so I don't really need the liquidity.
What can I do with that next 30k that is safe, more profitable than base rate plus 1, and still relatively accessible just in case.
If I was to reduce the mortgage, I'd also have the monthly premiums from this policy plus whatever extra saving from reduced interest - what ideas for that? Start a new ISA or similar?
What can I do with that next 30k that is safe, more profitable than base rate plus 1, and still relatively accessible just in case
So 4.5%, safe and readily accessible then? There's currently nothing that will give you all 3. You can get that kind of return safely but only by fixed term savings.
And likely to be 'returning' 5.5 or even 6% by Autumn....that was pretty much what I thought, just making sure I'm not missing anything obvious.
The only niggle is whether there'll be a share rebound which might get that 'lost'<b> </b>value back in the shortish term, but that isn't ticking the safe box.
Keep it to cover the next year's gas bill?
Keep it to cover the next year’s gas bill?
I’m glad I bought our current house outright when I had the opportunity rather than have a mortgage on it.
Last months gas/ electric was £650 (usually around £180-£200. Nice not to have to find that on top of a mortgage
Probably worth keeping 6 months cashflow in liquid funds in case your employment changes, after that clear all high cost debt ( credit cards etc ) and then pay down the mortgage ( market is looking for increases in base rate globally in ‘23 before stabilizing and dropping back ). Other obvious thing is buy a new bike etc as general inflation will outpace any interest on savings.
Got that already with the previous overpayment.
No CC debt, a couple of small loans but all on low numbers or i/free (phone is on a 12mo repayment but it's £15 a month and the interest on it is so minimal)
And I absolutely don't need a new bike...... no siree!
How do you plan to pay off the rest of the mortgage?
It’s an offset interest only mortgage too
The question here is whats your strategy for paying off the mortgage?
(The bank will want to know too)
Interest rates are only going to increase in the short term.
Its unlikely that you'll be able to match base rate +1% via savings in a non-risk way in the future.
OK, so if you want liquidity and minimum fees then look at index tracking funds , classically FTSE 100 is very international and FTSE 250 is more UK focused. But all funds can go down as well as up and definitely not a short term investment. Bond funds obviously are not as volatile. If placed into an ISA then you have the legal tax avoidance shield.
Alternatively invest in yourself , use the excess funds to travel ( with or without a bike ) or study.
But ultimately the safest thing is to pay down the mortgage and eliminate uncertainty.
Other investments that have longer to mature. I started some before I had a house and then for first few years of working life started others when I had payrises - before kids came and swallowed it all up. They are not technically linked to the capital sum, but this is what the investments were designed for
Alternatives could be - inheritance, one day (parents combined age is 165, wife's Mother is widowed and 80). Or pension lump sums. Or downsize. Or win the lottery, or rob a bank.....
Bank enquired before they agreed to the mortgage but didn't ask for them assigned and hence I can technically do what I want with them. In the end they were satisfied that I seemed suitably aware and had plans, and worst case I owe £115K on a £450K house, hence the downsize "safety net"
Solar panels?