Many mortgage holders find themselves in a familiar bind with mortgage rates rising and investments feeling the impact of global uncertainty. You’ve built up investments with the plan to clear the mortgage, but just as the time comes to cash them in, markets dip. Do you sell now and lock in a slight loss, or wait and hope for a recovery — knowing that interest rates could climb even higher in the meantime?
It’s a situation even experienced financial planners find challenging, and it highlights the balancing act of juggling investment risk, managing debt, and personal peace of mind.
The Balancing Act: Investments vs Mortgage Rates
Here’s a typical example. A couple’s fixed-rate mortgage deal ends in October, and they have enough saved in investments to clear the balance. If they paid it off now, there would be an early repayment charge (ERC), but it would still cost less than leaving the mortgage in place until the deal ends.
On the surface, it sounds like an easy decision — clear the mortgage now and save on future interest. But there’s a catch. Thanks to recent market wobbles (triggered, in this case, by Trump’s latest round of tariffs, Ah! That man!), the investments they planned to use have dipped slightly in value.
It’s not a huge loss but enough to make them pause. Should they lock in that loss by selling today or hold on and hope for a recovery before October? And what if the markets fall further? They could end up selling at an even lower price — or, if they can’t clear the balance, they may need to remortgage at a rate that could be 2% or 3% higher than their current deal.
Could They Have Seen This Coming?
It’s only natural to wonder if they could have taken some of this risk off the table sooner. With the benefit of hindsight, moving a chunk of their investments into cash six months ago might have been the safest option. But if they’d done that, they’d have missed out on the strong double-digit returns their investments delivered last year.
This is the eternal investor’s dilemma: trying to strike the right balance between locking in gains and staying invested for potential growth. In truth, very few people manage to time it perfectly.
The Risks of Waiting
At the heart of the decision are two competing risks:
- Investment risk — If they hold on and markets recover, they could end up in a better position. But if markets fall further, they could be forced to sell at an even lower value.
- Interest rate risk — If they don’t clear the mortgage now and rates rise before they need to remortgage in October, the cost of borrowing could easily outweigh any investment gains.
Both risks are very real — and neither is easy to predict.
Minimising Regret or Maximising Returns?
When making these decisions, it’s useful to shift the focus from trying to “win” to minimising regret.
- If you sell now and the market recovers, you might kick yourself for missing out — but you’ll have cleared the mortgage and removed a major source of financial stress.
- If you hold on and markets fall further, you might end up regretting not locking in what you already had — especially if it leads to higher borrowing costs down the line.
Neither option guarantees the best result, so the real question is: Which scenario would you find easier to live with?
Is There a Middle Ground?
If the all-or-nothing nature of this choice feels too risky, there are ways to soften the impact:
- Sell part of your investments now to pay off some of the mortgage, reducing your future borrowing and market exposure at the same time.
- Phased selling — Instead of waiting until October, you could gradually sell investments over the next few months, spreading the risk of selling at the wrong time.
- Explore rate options now — Some lenders let you secure a new mortgage rate in advance, giving you some protection against future rate rises even if you don’t remortgage until October.
These approaches won’t eliminate the risk entirely, but they can make it feel more manageable.
Remember the Purpose of the Money
One key reminder when facing this kind of decision is to revisit the purpose of the money you invested. If the plan all along was to use these investments to pay off the mortgage, then in many ways, the investments have already served their purpose — even if they’re worth slightly less than they were a few months ago.
Chasing further gains at the risk of undermining that original goal can often cause more stress than it’s worth. There’s nothing wrong with taking a cautious approach once your essential goals are within reach.
Key Takeaways
- Selling now locks in a modest investment loss but removes the risk of higher mortgage rates and further market falls.
- Holding on could allow investments to recover but exposes you to potential losses and higher borrowing costs if rates rise.
- A phased approach or partial sale could spread the risk and give you more flexibility.
- Your comfort with risk matters just as much as the numbers — the right choice is the one that lets you sleep at night.
The Bigger Picture
This kind of dilemma — balancing investment returns, mortgage rates, and personal peace of mind — is something most couples will face at some point in their retirement journey. There’s rarely a perfect answer, and that’s okay.
The important thing is to make a decision that fits into your broader financial plan, one that protects your essential goals and keeps your stress levels manageable. Whether you sell now, wait a bit longer, or choose a middle path, remember that this is just one step in a much longer story.
Need Help Making the Call?
If you’re facing a similar decision and want help weighing up the options, why not get in touch? I can help you work through the numbers, the risks, and — just as importantly — how the choice fits with your wider plans and priorities. Sometimes having an impartial sounding board can make all the difference.
