Sunday, 25 January 2009
Normally I avoid too much personal finance on the blog. However, having been recognised by The Times as one of the top Personal Finance blogs, I guess I had better do something.
Then as it happens I see this in the Sunday Papers. HSBC writing to people to say overpay your mortgage as your rate drops and save yourself a fortune in the long-term.
Is this a good idea?
On the plus side, saving rates are low so that is wasted, also who wants over £50,000 in a bank account anymore?
Secondly, if you have not lost your job then by keeping mortgage payments the same as before you won't have really altered your monthly budget.
Thirdly, investing in wold markets is a good way to lose your money as the moment as I am proving strongly in the early weeks of this year.
On the other hand there are some rather large elephants lurking int he corner. Firstly, HSBC needs to improve its capital ratios, pulling in more money is clearly in its best interests- hence the advice.
Perhaps even bigger though is that all the money thrown into the system is going to cause some big inflation in years to come. The price of Gold spiked to all time highs in pounds last week. If there is inflation to come then the last thing you want to do is pay debt, as that will inflate away quite quickly (could be painful if interest rates shoot up though...).
On balance I would not take HSBC's advice myself. Much better for me to pay off overdrafts, personal loans and credit cards if you have money available rather than a stable long-term mortgage.
What would you do?