Scottish homeowners warned against panic-paying mortgages

Chris Booth (Lycetts Financial Services)

A FINANCIAL expert is advising homeowners in Scotland against hasty mortgage overpayment decisions in the wake of recent research findings.

A survey by insurance broker, Lycetts, revealed that 66% of homeowners in the country would be more likely to pay off more of their mortgages in the current economic climate, than save or invest.

Chris Booth, Head of Lycetts Financial Services, said it is vital to consider the broader financial landscape before making what can prove a significant commitment.

“The high inflation and interest rates of recent months have affected mortgage costs, causing concern for many homeowners. This has tempted many to react impulsively and make panic-driven decisions.

“However, forecasts now suggest inflation may have peaked, indicating a potential decline in interest rates in the future.

“Additionally, with the UK technically in a recession, there is likely to be pressure on policymakers to keep interest rates stable or even lower them to support economic recovery.

“One of the key arguments against rushing to make larger mortgage payments and becoming mortgage-free is the loss of financial flexibility. Liquid assets, such as savings, pensions, or ISAs, offer individuals the freedom to adapt to unexpected circumstances or pursue other financial goals. In contrast, tying up all resources in a property can limit options and make it challenging to access funds quickly if needed.”

He emphasised the importance of taking a holistic approach to financial planning, considering factors such as retirement age, mortgage duration and future interest rate trends.

“A balanced strategy that accounts for both short-term needs and long-term financial security is called for.

“When it comes to choosing between savings and investment, individuals should look at prioritising tax-efficient options like ISAs, while also considering the benefits of pension contributions for long-term financial stability.”

He urged homeowners not to succumb to fear or uncertainty but instead to seek guidance from financial advisors to navigate these complex decisions.

“While paying off a mortgage may seem like a prudent move, it’s essential to weigh-up all options and consider the long-term implications. Maintaining financial flexibility and taking advantage of tax-efficient savings vehicles are critical steps towards achieving financial resilience and independence in turbulent times.”

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