Martin Lewis drops a bombshell: Should you overpay your mortgage or save? The renowned financial expert, Martin Lewis, has sparked a debate among savers and homeowners alike. In a recent BBC podcast, he discussed a Department for Work and Pensions (DWP) scheme that might make you reconsider your financial priorities.
But here's the catch: Lewis suggests that if your mortgage rate is higher than the best post-tax savings rate, overpaying your mortgage could be a smarter move than saving. This advice was in response to a listener's query about a £90,000 lump sum, with a mortgage rate of 5.6%.
And this is where it gets interesting: While Lewis generally advises against saving at 5.6%, he did mention two exceptions. First, the Help to Save scheme for those on Universal Credit, offering a 50% bonus on deposits. Imagine saving £2,400 over four years and getting £1,200 in bonuses! Second, regular saver accounts with rates over 7%, but these have monthly deposit limits.
For instance, Nationwide Building Society's Flex Regular Saver offers 6.5% but restricts monthly contributions to £200. Zopa's Regular Saver leads the market with 7.1%, allowing up to £300 monthly. However, with the Bank of England's base rate currently at 3.75%, financial experts predict further cuts this year, which could impact these savings rates.
So, should you rush to overpay your mortgage? It's a controversial strategy, especially considering the potential benefits of long-term savings. What do you think? Is Lewis' advice universally applicable, or are there hidden pitfalls? Share your thoughts in the comments below!
