Is it a good idea to be focussing on chipping away (overpaying) my mortgage debt during the current Recession?
This could be a good idea whatever the economic situation – if you can afford to do it. It can sometimes be better for your finances than putting money into a savings account, depending on your individual circumstances. Here’s why: the mortgage and savings market is very straightforward in essence. Lenders get money in by paying interest to savers, and they then lend that money on to homebuyers, charging them interest to pay the savers. To make this worthwhile, the lenders tend to charge the borrowers a little more than they pay the savers – so mortgage rates are generally higher than savings rates. So, for example, paying £100 of a mortgage where the rate is 4% gives a better return than putting £100 into a savings account where the rate is 3%. Over a year you’ll save £4 in mortgage interest, but you’d only earn £3 in savings. There are lots of caveats of course. For example, saving is still a good idea so you’ve got money behind you if you need it. Also, if you’re on a mortgage deal,
