Martin Lewis explains key interest rule that decides whether to overpay your mortgage

ok.co.uk:

Martin Lewis has explained a key interest rule for paying your mortgage as rates continue to rise. It comes after financial comparison website, Moneyfacts.co.uk recently revealed that the typical two-year fixed mortgage hit 6% for the first time since December.

Millions of people have been hit hard by the staggering increase in mortgage rates, leaving those who need to remortgage or buy a home facing a higher monthly bill.

Speaking in the latest MoneySavingExpert.com newsletter, Martin explained: "New fixed-rate mortgage deal costs are rising rapidly, as lenders believe UK interest rates may now peak at nearer six than five per cent. "Most have already factored in the Bank of England's likely 13th consecutive rise due this Thursday - the cheapest fixes are roughly 1% point higher than in April (c. £50/mth more per £100,000 mortgage)." The MoneySavingExpert continued: "Today I want to look at a question I'm asked a lot: should those with savings use them to reduce their mortgage debt?" Martin said the first rule is that if your mortgage rate is higher than you can earn in savings, then you could benefit from overpaying.

He went on to give the example - if you saved £10,000 at 3% this would earn £300 for the year, but if you used the same money to overpay a 5% mortgage it could reduce your costs by £500 over the same period.