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
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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