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This is what I've been doing and though it sometimes feels like you'd be better off dropping in overpayments on the mortgage, or rather that the uncomfortable feeling of saddling yourself with mortgage level debt would be eased by doing the mathematically incorrect thing.
If Lloyds are still doing it they have a 4% up to £5000 current account, TSB also used to let you have two of those current accounts so you could have £9000 as an easy access buffer/emergency fund, plus the First Direct Regular Saver all out performing overpayments. If you're particularly risk adverse you could open a Santander 123 Current Account after that and earn 3% on up to £20,000.
Personally even if the money wasn't outperforming overpaying I'd still ideally want an emergency fund and would prioritise that for peace of mind.
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±ln(x)
So a bit of a long one after doing a fair bit of research on MSE.
I’m planning on overpaying on the mortgage but trying to work out whether it’s worth saving first to make the most of my money (and try and rebuild some savings).
On the MSE “is it worth overpaying calculator” it says I need to earn 3.4% interest (before tax) with my 2.69% mortgage.
There is a TSB account @ 5% up to £2k and a First Direct @ 6% (but only accumulable at £300p/m with £3,600 total).
Neither of these are wild figures, but what I wanted to sound out was whether it is worth using up both of those obvious routes before overpaying?
my logic is it will give me a practical emergency buffer while “beating” overpayments ( 5% > 3.4%).
in the short term this is binary, but in the medium term it isn't. So I can over pay in a year or two.
Just on the saving being better value, does that all stack up? (Creating a buffer obviously has its own benefits).
Cheers.
NB. Overpayments are permanent and can’t be offset/redeemed etc.