Frugal Fergal

The "credit crunch" has officially hit and the UK is in a recession. Times are going to get a lot harder, though I hope some of the tips on FrugalFergal.co.uk will help lessen the impact, and people are going have to reign in their spending and put their finances in order.

One of the first things to do during a recession is get rid of as much debt as possible. This post assumes you've already done that and the only debt you have left is your Nationwide tracker mortgage. I say Nationwide tracker mortgage as this is all I have experience with, but you may find your lender offers a similar service.

With huge drop interest rates over the last few months, you'll have noticed your mortgage payments have come down quite significantly. Nationwide have been phenomenally good at keeping to their promises and dropping the interest rates as the Bank of England does. They've even been good by not enforcing the collar on most tracker agreements too, so you'll be saving quite a fair chunk on your monthly mortgage payments.

Now, you don't want to go flit that away down on the high street. You want to put those savings back into your mortgage, and if possible pay more. With interest rates so low, it's a great time to over pay your mortgage.

Naturally over paying your mortgage will result in savings over the long run, but did you know that if you over pay your Nationwide Tracker mortgage by £500 or more in any given month (please check your T&Cs), they'll recalculate your monthly mortgage repayments from that point on and you'll reap the benefits NOW too.

We found that one single £500 overpayment on an outstanding balance of about £100 000 resulted in a reduction in our monthly repayment of just short of £60. That's more of a saving than a 0.5% drop on interest rates gave us.

Overpaying your mortgage will stand you in good stead in the event something goes wrong in your financial situation. Nationwide are likely to look upon your requests for change (eg payment holiday, term extension, increase of loan amount etc) more favourably thanks to the over payments.

Keep in mind this only reduces your payments, if you prefer to reduce the term of your mortgage, then you'll need to phone Nationwide and ask them to reduce the term rather than the repayments.

So if you want to save money in the long run and now, over pay your Nationwide Tracker mortgage by at least £500 whenever possible.