To spend or to save?

[theboyfold]

That is the question!

I've just found out that the ISA I have currently pays a whopping 0.5% interest, however, I can move it to one that pays around 2.5%. Which I will do with the money that's in there anyway.

So, I'm looking to either spend (over pay on the mortgage) or save (into an ISA) 10% of my take home pay each month. What's the current thinking on which pays best? At the moment the mortgage is on base rate with Nationwide so I'm free to over pay as much as I can and the interest rate is the same.

I don't have lashings of savings kicking around, just enough if a few things go tits up, beyond that I have a family around me who will never let anything very bad happen (Please don't read this as I'm living of my old man, as that's far away from the truth) or a Boxster that can be shown the door if needs be!

My thinking is that rates are going to go up, and when this happens the mortgage will be most effected by this so I should work on making it as small as possible...

[Fittster]

Clear debt before saving. The interest you are paying on your debt will be greater than that on your savings.

Keep some saving for little emergencies.

[KENZ]

Clear debt on high interest, otherwise spend, inflation pressures will push everything up in price

[theboyfold]

musclecarmad said:

not necessarily.

OP, we need to know what your bloody mortgage rate is first!

Sorry, meant to say it's on base rate at 2.5% with Nationwide.

[CaptainSlow]

I'm in the same position (same lender on same rate).

I would say don't over pay the mortgage. Move the ISA to a somewhere that pays a higher rate and pay into that, the logic being is that you don't lose your annual ISA allowances, you can always withdraw it and overpay your mortgate if needed at a later date. Depending on your circumstances you may even wish to consider increasing your pension contributions.

Edited by CaptainSlow on Monday 20th September 11:47