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Interest Savings
Posted: Sat Mar 19, 2011 10:14 pm
by Gavin Strachan
If the interest rate at the moment is at .5% if you have a mortgage is it better to just put money into some form of savings which have a terrible 3%+ and have an interest only mortgage? At 3% £1000 per month over 10 yrs you save 143,000+ before tax.
I am not an accountant!
Re: Interest Savings
Posted: Sat Mar 19, 2011 10:29 pm
by Roger de Coverly
Not being of a charitable nature, banks usually work on the premise that they make money by borrowing low and lending high. So if they offer you 3%, they expect to get more than that by lending.
Here and there, they made the mistake of tying their mortgage rate to the Bank Base rate, which as you say in one half of 1%. They have to honour existing deals, but I couldn't see them wanting to lend money to you. As you point out if you can borrow at 0.5% and save at 3%, you are quids in , but they don't let you ( unless they blundered earlier when the 0.5% was 4.5%).