Hi Manchester. I’m also a UK person. Being quite cautious I was a mortgage over payer so I don’t particularly belong on this thread! However there is a lot of good advice here and there are other threads that are worth looking at that discuss mortgage overpaying versus investing.
The US do have the security of 30 year fixes and I believe they can claim back tax against their mortgage payments. Someone on here can correct me if I’ve got this wrong. Therefore the case for not overpaying in the US is a lot stronger than it is for us. My worry was always coming out of a fixed period and finding interest rates were now 8%+. My parents stories of a 12% mortgage rate got to me here.
With the marvellous wisdom of hindsight my mortgage was never higher than about 4.5% and the markets have performed well over the last few years. So I would have been better investing.
So it really is about your attitude to risk and how easy it will be for you to sleep at night with whatever choice you make. How much do you expect interest rates to rise in the next few years? How do you think markets will perform over the next few years. How will Brexit turn out? What’s your job security like as far as you can tell? All questions I don’t expect you to be able to answer. Although if you do know the answers please tell me!
What rate can you get a 5 year fix at? Although it won’t be as low as 1.7% if it’s 3% or something and you have 5 years where you know it can’t go up that would give you more freedom to invest.
Good luck. Well done for getting on the housing ladder so young and putting proper thought into how to proceed. Although there is an optimum choice here (hindsight will inform you what it was) at the end of the day investing or paying off a mortgage are great things to do. You’re not using the money to buy a £40,000 monster truck on credit so either way you’re winning.
Thanks for your feedback. It's good hearing things from a different point of view.
In terms of the questions you've asked, I'll try and give it a go. :P
How much do you expect interest rates to rise in the next few years?If our economy continues plugging along, we'll most likely see another rise of 0.5% per year. If Brexit goes terribly wrong, I reckon they will be kept low to encourage spending.
How do you think markets will perform over the next few years.It's nearly impossible to predict this. I think they've shot up a bit excesively over the past year, I think there will be a correction soon. Even if they plummet it wouldn't upset me much. Just a signal to chuck more money into it.
How will Brexit turn out?Right now it looks like we're going to get shafted!! We'll probably end up with a Norway type deal (we pay an annual fee to access free market).
What’s your job security like as far as you can tell?I'd say it's pretty safe. I work for myself (so no chance of getting fired) and I have over 300 customers who pay me a licencing fee to use the companies software. It would take a change in legislation to put all 300 of my customers out of business. But we've started diversifying and around 10% of our turnover comes from other industries now.
Overall I think that I can afford a certain level of risk now because if it goes wrong I'll have a long time to sort it out. I'm not necessarily rushing to retire, I want to rush towards being financially independent and not having to work. I think this makes me a lot more chilled out about money - I can manage stress quite well.