Profiting from your mortgage

Low borrowing rates mean it could be better to put spare cash in a savings account rather than pay off your mortgage
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While most savings rates are also low, it is still possible to earn five per cent fixed and up to three per cent on instant-access accounts.

How do the numbers work?


About a million borrowers are paying mortgage rates of two per cent or less, estimates John Charcol mortgage brokers. Even for someone paying 40 per cent tax on their savings interest, a five per cent fixed-rate bond would give three per cent net (a one per cent return over the cost of a two per cent loan).

Putting £50,000 in a five per cent savings bond could therefore be worth an extra £500 a year to a higher-rate taxpayer. That extra return could then be used to repay more of the debt, bringing forward the day you become mortgage-free.

Most of the borrowers who can take advantage will be on older base-rate tracker mortgages. Couples who hold their savings in the name of a non-taxpaying spouse stand to do particularly well.

Any catch?


No, but if you pay off some of your mortgage now you might get a better deal when your discount period ends, by which time interest rates may have increased.

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