You could be paying out more than double in interest each month than you can earn from your savings accounts. If your savings earns less interest than the amount you pay on your mortgage, then you will save more money by using these to pay-off your mortgage balance. However, you should make sure that you keep the equivalent of at least three month’s salary as an emergency fund. The table below shows that if you have £15,000 in savings at 1% this will earn you £150 in interest in 12-months, compared to an interest cost of £492 for the same amount on your mortgage.
||Savings gross interest at 1% per year
||Mortgage interest at 21.5% in one year
All calculations assume that interest is calculated and applied annually. Mortgage interest figures are maximums based on what you could pay on an interest-only mortgage over a 25-year term.