Invest in Stocks or Repay My Mortgage Quickly?

A common question in financial planning is whether you should invest more or aim to reduce your mortgage.

Borrowing at a low interest rate and investing for growth seems like a sound strategy, as the idea is to repay the debt comfortably and build a nest egg at the same time.

This was the logic behind the popularity of endowments in the 1980s. Borrowers would take out an interest-only mortgage and an investment product to reduce their monthly repayments and have a little left over at the end of the term.

Of course, many investors found that their endowments fell short of the amount needed to repay the original debt, partly due to high fees, underperformance and market downturns.

Investing is never risk-free, but in many cases, the risks were not adequately explained. High charges and complex investment products meant that achieving the required growth would always be challenging.

Today, we have more investment options and greater transparency and clarity over charges. In theory, many of the issues that led to the endowment crisis no longer apply.

Investing is always more risky than repaying debt, but whether it is the right decision for you will depend on many different factors.

Reasons to Invest

There are several reasons why investing could be a better option than repaying your mortgage early:

Interest rates are low

Interest rates have been on a downward trend in 2025, following increases since 2022. For example, the average two-year fixed-rate mortgage is approximately 4.24%, and the five-year fixed-rate mortgage is around 4.19%. If you can achieve an average investment growth of 7% per year, investing might offer better returns than repaying your mortgage early.

Investments usually increase over the longer term

Investments go up and down on a daily basis. It’s not unusual to see a drop in the value of your investment, especially in the short term. But over time, a properly diversified investment strategy is likely to produce higher returns than cash.

You will have more flexibility

If you repay your mortgage, you might be unable to borrow the same amount again. Even if you can afford to clear your debt, you may prefer to keep your options open.

You can cope with risk

Experienced investors understand that markets fluctuate but tend to trend upward over the long term. They can cope with the fluctuations because they know that short-term bumps are part of the plan and that they won’t need the money for a long time. They do not panic and withdraw their investment when the market falls.

Reasons to Repay Your Mortgage

Of course, you may feel that repaying your mortgage is a better option for you, for the following main reasons:

Interest rates could rise

The financial press is full of speculation about inflation at the moment in 2025. While the Bank of England reduced the base rate to 4.25% in May 2025, ongoing global economic uncertainties, including trade tensions, make the trajectory of future interest rate changes uncertain.

When inflation is high, interest rates rise, which can help curb spending and keep prices under control. It was not too long ago that interest rates were over 5%. If your mortgage rate increased to this level, could your investments consistently keep up?

Investments go up and down

Volatility is part of investing. We expect the ups and downs, as historically, a crash tends to be quickly followed by a recovery, which is stronger and more sustained than the initial drop.

The uncertainty is over how soon this occurs and how long it will take. If your investment drops in value just before you need to withdraw money, this could impact your plans.

The key is to continually review and manage risk so that your capital is ready when you need it.

Debt can make you more financially vulnerable

If you have large amounts of debt, this will increase your outgoings and impact your credit score. Your investments may compensate for this.

But what would happen if a recession occurred and you were unable to work? Your investments would lose money, and you would still need to cover your mortgage repayments.

Keeping a cash reserve means you can better deal with these scenarios without derailing your financial plan.

You prefer certainty over potential growth

Repaying debt is a certainty. You will no longer be affected by interest rate or investment fluctuations, and will have the security of a home owned outright.

If you can do this, as well as make sure you have an adequate retirement pot, you will be in a very comfortable position.

If this is more important to you than growth potential, repaying your mortgage early could be the best option.

Other Options

Investing and repaying your mortgage are not the only two options. Other priorities include:

• Paying off more expensive consumer debt, such as credit cards or car loans.
• Topping up your cash reserve so you can deal with unexpected bills more easily.
• Increasing your life cover, critical illness or income protection insurance so that you are protected in the event of death or illness.

If You Do Decide to Invest

Here are our top tips for a successful investment strategy:

• Diversify – holding a wide range of assets across different asset classes, sectors, and regions is the best way to capture the growth in the market, while smoothing out some of the risk.
• Manage risk – shares tend to outperform other investments over the longer term, but they are also volatile. The amount of volatility you can cope with will depend on your attitude to risk, how long you can invest for, and how your financial plans would be impacted by losses.
• Don’t be led by trends – chasing tips and hot stocks is rarely profitable in the long term, and takes up a lot of time.
• Build discipline – investing regularly, staying on course, and not being tempted to dip into your fund will create good habits and give you a greater chance of success.
• Be patient – investing is a long-term strategy.

Please don’t hesitate to contact a member of the team to find out more about your investment options.

The value of your investments and pensions (and any income from them) can go down as well as up which would have an impact on the level of benefits available