How do UK Gilts interest rates and repayments work?
"A title such as ""5% Treasury Gilt 2020"" expresses the nominal yield.  In other words, 5% is the yield you will receive if you are able to buy the Gilt at the nominal (issue) price of GBP100. Of course, you will not be able to buy such a Gilt in today's market for the nominal price of GBP100.  It will be trading at a considerable premium and therefore, if you hold it until maturity you will realise a capital loss to offset the relatively high income you have received. Here is an example.  The ""8% June 2021 Gilt"" has a coupon of 8%.  To purchase a GBP100 nominal Gilt in today's market will cost you GBP135.89.  Thus, you will pay 135.89 to receive GBP8.00 income annually.  This represents a 5.88% yield (8/135.89 = 5.88%).  That sounds pretty good.  However, if you hold the Gilt until maturity you will only receive GBP100 on redemption and therefore you will experience a capital loss GBP35.89 on each Gilt purchased.  When this capital loss is taken into account it means that the 5.88% yield you are receiving as income will be offset by the capital loss so that you have earned the equivalent of 0.757% annually.  You can of course sell the Gilt before its 2021 maturity date, however as the maturity date gets closer the market price will get closer to the GBP100 nominal value and you will again face a capital loss.  There's no free ride in the markets.  5 year Gilts currently have a redemption yield of about 0.75%, while 10 year Gilts currently have a redemption yield of about 1.15%. You may also wish to note that buying Gilts in the open market requires a minimum purchase of GBP10,000 nominal value.  However, you can purchase small Gilt holdings through the post office." "The name of the Gilt states the redemption date, but not the original issue date. A gilt with 8.75% yield and close to its redemption date may have been issued at a time when interest rates were indeed close to 8.75%. For example in the early 1990s, the UK inflation rate was about 8%. One reason for preferring high or low coupon gilts is the trade off between capital gains and income, and the different taxation rules for each. If you buy a gilt and hold it to its maturity date, you know in advance the exact price that it will be redeemed for (i.e. £100). You may prefer to take a high level of income now, knowing you will make a capital loss in future (which might offset some other predictable capital gain for tax purposes) or you may prefer not to take income that you don't need right now, and instead get a guaranteed capital gain in future (for example, when you plan to retire from work). Also, you can use the change in the market value of gilts as a gamble or a hedge against your expectation of interest rate changes in future, with the ""government guaranteed"" fallback position that if your predictions are wrong, you know exactly what return you will get if you hold the gilts to maturity. The same idea applies to other bond investments - but without the government guarantee, of course."
First, assuming you are making payments for a savings deposit.  The present value of the deposit is the sum of the all the payments discounted to present value.  In this case they would be discounted by the rate of inflation: £100 deposited next year is worth less than £100 today because it will be eroded by inflation.  With a higher rate of inflation the payments are discounted more heavily, so the present value decreases.  A deposit, or annuity due (see Calculating the Present Value of an Annuity Due), can be expressed mathematically like so:-  ∴ by induction  So for example, the following annuity has a present value of £1,136.76 The total amount that will be paid for the annuity is 12 x £100 = £1,200.  With a higher rate of inflation, say 2% per month, and with the same 12 x £100 payments, the present value of the annuity decreases. In Excel (£1,078.68) A similar case is that for a loan, or ordinary annuity (see Calculating the Present Value of an Ordinary Annuity), except the discounting factor is the loan interest rate rather than inflation and repayments are made at the end of each period rather than at the start. The present value of a loan is the value of the all the future repayments discounted to present value.  With a higher interest rate the payments are discounted more heavily, so the present value decreases.  A loan can be expressed mathematically like so:-  ∴ by induction  So for example, the following values fulfill a loan worth £1,125.51 The total amount that will be paid for the loan is 12 x £100 = £1,200.  With a higher rate of interest, say 2% per month, and the same 12 x £100 repayments, the present value of the loan that can be obtained decreases. In Excel (£1,057.53) It depends what rate mortgage you can get for any extra loans...  If you remortgage you are likely to get a rate of 3.5-4%... depending who you go with. With deposit accounts in the UK maying around 1% (yes, you can get more by tying it up for longer but not a huge amount more) clearly you're better off not having a mortgage rather than money in the bank. Does your 8k income allow for tax? If it does, you are getting 6% return on the money tied up in the flat. If you are getting 6% after tax on the invested money, that's way better than you would get on any left over cash paid into an investment. Borrowing money on a mortgage would cost you less than 6%... so you are better off borrowing rather than selling the flat. If you are getting 6% before tax... depending on your tax rate... it probably makes very little difference. You'd need to work out how much an extra 80k mortgage would cost you, how much the 50k on deposit would earn you and how much you make after tax. There is a different route. Set up a mortgage on the rental flat. You can claim the interest payment off the flat's income... reduce your tax bill so the effective mortgage rate on the flat would be less than what you could get with a mortgage on the new house. Use the money from the flat's mortgage to finance the difference in house price. In fact from a tax view, you may be better off having a mortgage free house and maxing out the mortgage on the flat so you can write off as much as possible against your tax bill. All of the above assume ... that the flat is rented all the time. The odd dry spell on the flat could influence the sums a lot. All of the above assume that  your cash flow works whichever route you choose. As no-one on stack exchange has all of the numbers for your specific circumstances it may be worth talking to a tax accountant. They could advise you properly, knowing the numbers, which makes the best sense for you in terms of overall cost, cash flow, risk and so on. As someone with a lot of student loan debt, I can relate - the first thing you should do is read the promissory note on your current loans - there might be information there you can use.  For govt loans (stafford, etc) made after July 1, 2006 the interest rate is going to be fixed and even a federal direct consolidation is not going to lower the rates themselves.  If anything, consolidation will just increase the repayment period, which means you'll end up paying more in the long run.   Most private Loans usually offer variable interest rates, which today are quite low. But unless your financial situation is very comfortable and stable, consolidating out of federally guaranteed loans into private loans might not be the best path.  You might lose options like deferment, forbearance, and maybe even things like a death benefit (if you die, your loans die with you). related - if you have a co-signer you don't get that death benefit! But refinancing into a variable rate private loan is going to push a lot of risk to you in terms of interest rate inflation, etc. Most financial professionals will agree that interest rates can only go up in the long run. Keep in mind, student loans are completely unsecured - meaning lenders are taking a fairly large risk in loaning money (and probably why the fed govt has to guarantee most of them).  I've heard of people borrowing against their home equity to pay down student loan debt - but I can't think of a reason you'd want to substitute secured for unsecured debt and possibly lose the loan interest tax deduction.  The bottom line is you're unlikely to find an alternative lending source at a lower interest rate for an unsecured student loan.  Another option may be the income based repayment plan. If you qualify, it caps student loan monthly payments at 15% of your discretionary income (discretionary is your income minus whatever the poverty threshold income amount is). And if that 15% doesn't even cover the interest on the loans, the govt picks up the tab for the difference (for up to 3 years). You have to re-qualify every year by sending in all sorts of documentation, but if you somehow stay on IBR for 25 years, your loans are then forgiven. Obviously the downside here is that you are probably paying little to no principal, but if you do the math and determine that your IBR payment would be next to nothing, and your current situation is barely paying interest-only... well, maybe IBR isn't a bad thing for a couple of years (or 25 if you think you will never have a larger income).   Personally, I went through all these options as well and decided that my best option was to just earn more money... a 2nd job or side project here and there helps me pay down the debt faster, and with less risk, than moving to private variable rate loans. From the description, you have a post-1998 income contingent loan. The interest rate on those is currently 1.5% but it has varied quite a bit in the last few years due to the formula used to calculate it, which is either the inflation rate (RPI), or 1% + the highest base rate across a group of banks - whichever is smaller. This is indeed really cheap credit compared to any commercial loan you could get, though whether you should indeed just repay the minimum depends on making a proper comparison with the return on any spare money you could get after tax elsewhere. There is a table of previous interest rates. From your description I think you've had the loan for about 4 years - your final year of uni, one year of working without repayments and then two years of repayments. A very rough estimate is that you would have been charged about £300 of interest over that period. So there's still an apparent mismatch, though since both you and I made rough calculations it may be that a more precise check resolves it. But the other thing is that you should check what the date on the statement is. Once you start repaying, statements are sent for a period ending 5th April of each year. So you may well not be seeing the effect of several months of repayments since April on the statement. Finally, there's apparently an online facility you can use to get an up to date balance, though the administration of the loans repaid via PAYE is notoriously inefficient so there may well be a significant lag between a payment being made and it being reflected in your balance, though the effect should still be backdated to when you actually made it. It's so that your total mortgage payment stays the same every month. Obviously, the interest due each month decreases over time, as part of the principal is paid off each month, and so if the proportion of interest and principal repayments were to stay the same then your first payment would be very large and your last payment would be almost nothing. By your logic, if a loan of £100 is new money dilutes your purchasing power, then the repayment of £110 is a reduction of the money supply that increases your purchasing power.  Indeed, ultimately the increase in purchasing power upon repayment is greater than the initial reduction, so you are 'better off' every time a loan is made and successfully repaid. The effect on you is tiny, but the collective benefit you get from all the loans being repaid with interest is more or less equivalent to the purchasing power reduction of the loans that are never repaid.  Therefore you do not lose out and are indeed compensated (in a tiny way) for the tiny risk you incurred. The bank incurs a substantial risk and is thus compensated in a substantial way. This is more of an interesting question then it looks on first sight. In the USA there are some tax reliefs for mortgage payments, which we don’t have in the UK unless you are renting out the property with the mortgage.  So firstly work out the interest rate on each loan taking into account any tax reliefs, etc. Then you need to consider the charges for paying off a loan, for example often there is a charge if you pay off a mortgage.   These days in the UK, most mortgagees allow you to pay off at least 10% a year without hitting such a charge – but check your mortgage offer document. How interest is calculated when you make an early payment may be different between your loans – so check. Then you need to consider what will happen if you need another loan.   Some mortgages allow you to take back any overpayments, most don’t.  Re-mortgaging to increase the size of your mortgage often has high charges. Then there is the effect on your credit rating: paying more of a loan each month then you need to, often improves your credit rating. You also need to consider how interest rates may change, for example if you mortgage is a fixed rate but your car loan is not and you expect interest rates to rise, do the calculations based on what you expect interest rates to be over the length of the loans. However, normally it is best to pay off the loan with the highest interest rate first.  Reasons for penalties for paying of some loans in the UK. In the UK some short term loans (normally under 3 years) add on all the interest at the start of the loan, so you don’t save any interest if you pay of the loan quicker.    This is due to the banks having to cover their admin costs, and there being no admin charge to take out the loan. Fixed rate loans/mortgagees have penalties for overpayment, as otherwise when interest rates go down, people will change to other lenders, so making it a “one way bet” that the banks will always loose.   (I believe in the USA, the central bank will under right such loans, so the banks don’t take the risk.) "First note that CIBC issued these bonds with a zero coupon, so they do not pay any interest.  They were purchased by the market participants at a small premium, paying an average of 100.054 for a nominal value of 100.  This equates to a negative annual ""redemption"" yield of 0.009% - i.e., if held until maturity, then the holder will witness a negative annual return of 0.009%. You ask ""why does this make sense?"".  Clearly it makes no sense for a private individual to purchase these bonds since they will be better off simply holding cash.  To understand why there is a demand for these bonds we need to look elsewhere. The European bond market is currently suffering a dwindling supply owing to the ECBs bond buying programme (i.e., quantitative easing).  The ECB is purchasing EUR 80 billion per month of Eurozone sovereign debt.  This means that the quantity of high grade bonds available for purchase is shrinking fast. Against this backdrop we have all of those European institutions and financial corporations who are legally obliged to purchase bonds to be held as assets against their obligations.  These are mostly national and private pension funds as well as insurance companies and fund managers.   In this sort of environment, the price of high quality bonds is quickly bid up to the point where we see negative yields. In this environment companies like CIBC can borrow by issuing bonds with a zero coupon and the market is willing to pay a small premium over their nominal value. TL/DR The situation is further complicated by the subdued inflation outlook for the Eurozone, with a very real possibility of deflation.  Should a prolonged period of deflation materialise, then negative redemption yield bonds may provide a positive real return."