With stock markets on red alert, inflation at almost 5% and petrol and food prices going through the roof, now is a worrying time to be around. It isn't a great time to be shouldering a hefty mortgage either, with rates still high and the market effectively frozen. It may be the case that although you have thousands of pounds of equity in your home, you are still struggling because your “LTV" is too high.
At the moment, the banks are tripping over themselves to attract savers so that they don't have to borrow from each other. Inter bank borrowing has frozen up since the Credit Crunch started as they worry about who has loaned how much to this risky borrower or that dodgy finance house.
It is important to be aware though that the Headline offers being advertised in the banks at the moment may not turn out to be as good as you imagine. You must look at what you are actually going to have once inflation has been taken off - and Gordon Brown has taken his cut.
A market-leading 6.5% instant access savings account, like Bradford & Bingley's, is actually only worth 1.9% after you've subtracted the Retail Price Index, which has risen to an 11-year high of 4.6%. Then of course there is 20% tax on the interest, or 40% if you're a high-rate taxpayer. At basic rate, the B&B real net return on cash saved for a year is an uninspiring 0.6%, and actually minus 0.7% for top-rate taxpayers.
Now imagine that instead of saving the money in that account, you had instead used it as a mortgage overpayment. With most peoples mortgage rate at around the 7% market (if it isn't now it will be when your fixed rate ends!), a saving of £10,000 equates to £700 less interest due. By continuing with your normal monthly mortgage payment even after paying in the lump sum, your equity will snowball - resulting in your mortgage ending much more quickly.
Not only does this mean that you are getting more bang for your buck, but it also means that your money is safe (remember Barings?) and also that you will be reducing your LTV - the key ratio in today's mortgage market. By bringing down your LTV you will be in prime position to capitalise on new mortgage deals when everything gets back to normal.
My name is Ross Taylor and I am committed to helping you feel real Freedom by paying off your mortgage in the quickest possible time. I have devised an easily followed plan which anyone can use to be mortgage free in 10 years! Please visit http://www.uncommonadvice.co.uk to learn more.