Episode 421 - On this week's episode I explore the impact of changes in the Bank of England base rate on investment markets, including equities, bonds, and commodities. I also provide insights on how to position a portfolio to benefit from these changes. Next, we discuss the concept of overpaying a mortgage during a high interest rate period and whether it is the best option if you are approaching the end of a low fixed-rate deal in the next couple of years. With 42% of house sellers now accepting offers below their asking price, we highlight a tool that can increase your chances of securing your asking price.
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Abridged transcript of Episode 421
Netwealth’s wealth management service combines a comprehensive low-cost investment solution with access to qualified advisers.
They recently launched MyNetwealth – a digital dashboard that combines all your savings and investments – from multiple providers – in one place.
MyNetwealth's wealth planner tool helps you visualise your current wealth and apply it to your future needs. It takes into account various factors such as age, investments, pensions, tax wrappers, and expected contributions or withdrawals – and calculates the likelihood of you achieving your goals. Daily updates make it easy to track the value and performance of your wealth.
MyNetwealth also provides a library of useful personal finance content and if you ever need advice or guidance, their highly qualified team is always there to help.
You can find out more information and sign up for MyNetwealth in 30 seconds visit my.netwealth.com. Please remember, the value of investments can go down as well as up, so you may get back less than you invest.
Should you overpay your mortgage before remortgaging
In this section of the podcast we discussed the best strategies if your are worried about how much your mortgage payments will increase by when you come to remortgage. The discussion assumed that you don't have significant savings so can't take advantage of an offset mortgage. Here are some of the highlights:
- Overpaying your mortgage in a high interest rate environment can be financially beneficial over the long-term as it reduces the amount of interest paid and shortens the loan term.
- However, before you consider overpaying your mortgage ensure you have a cash buffer for emergencies and prioritise paying off high-interest debt (i.e credit cards) before overpaying your mortgage.
- If you are thinking about overpaying your mortgage then check your mortgage contract carefully for details of any early repayment charges and overpayment limits (often 10% of the outstanding mortgage balance each year).
- Overpaying can improve your loan-to-value ratio when you come to remortgage, potentially leading to better interest rates and lower monthly repayments.
- Most lenders do not allow you to borrow back any overpayments, while others offer flexible mortgage options (e.g. VIrgin Money) that allows unlimited overpayments, underpayments and payment holidays .
- Always discuss the impact of overpaying with your lender to avoid negative effects on your credit file.
- New rules have been introduced to temporarily modify mortgage terms without impacting credit scores to help those struggling with rising mortgage rates (see the link in the Resources section below for more details).
- When making overpayments inform your lender that you want overpayments to reduce the mortgage term rather than lowering monthly payments.
- In this part of the podcast we also provide a case study that illustrates the potential benefits of overpaying your mortgage vs saving the extra money in a savings account to help subsidise your repayments once you remortgage.
- The short-term plan of saving the extra money into a savings account might help you cope with rising interest rates in the next two years, while overpaying is a long-term strategy that reduces your mortgage payments and mortgage term.
Investing through the Bank of England interest rate cycle
On this part of the podcast we discussed the latest piece of 80-20 Investor research (see link in the Resources sections below) on how best to invest when interest rates are hiked, paused or cut.
Getting the most for your property
On this section of the podcast we discussed a tool that allows you to find the estate agent that has the best record of achieving a seller's asking price. Full information can be found via the link titled "Find the best and cheapest local estate agent in seconds" below.
Resources:
Links referred to in the podcast:
- Mortgage overpayment calculator
- Mortgage repayment calculator
- Is it worth paying an early repayment charge to remortgage early?
- Mortgage lenders agree to new charter
- 80-20 Investor - Investing throughout the interest rate cycle
- 42% of sellers accepting 5% or more discount on asking prices
- Find the best and cheapest local estate agent in seconds
