Paying off your mortgage
Performance of £ 1,000 invested in indices 05 / 03 / 2009 – 04 / 05 / 2022
MSCI World (£ 5,974.59 )
FTSE All Share (£ 3,698.34 )
Bank of England Base Rate (£ 1,061.33 )
£ 7,000 |
|
|
|
|
|
|
£ 6,000 |
|
|
|
|
|
|
£ 5,000 |
|
|
|
|
|
|
£ 4,000 |
|
|
|
|
|
|
£ 3,000 |
|
|
|
|
|
|
£ 2,000 |
|
|
|
|
|
|
£ 1,000 |
|
|
|
|
|
|
0 |
|
|
|
|
|
|
Mar09 |
Mar11 |
Mar13 |
Mar15 |
Mar17 |
Mar19 |
Mar21 |
Source : FE Analytics
much-maligned FTSE All Share index would have generated an additional £ 2,698.34 . Yet using it to pay off a tracker mortgage instead would have saved you a paltry £ 61.33 in interest .
Not so fast … If these figures seem too good to be true , that ’ s because they probably are . Yes , 5 March was the day the Bank of England cut interest rates to 0.5 %, but more importantly , it was one day away from the bottom of the market . Choosing to invest on that day and that day alone is statistically less likely than winning on a 1,000-to-one shot at the Epsom Derby . This is not the only factor that calls the relevance of the above example into question . Morgan points out that when interest rates are higher , as they are now , there is less of an opportunity cost . “ It is one thing bettering a 2 % or 3 % rate with investment returns ,
Issue 89 - November 2022 / 9 /