There is considerable discussion amongst news-mongers that interest rates in the US, UK and Australia are likely to hold or at best decrease when each respective countries monetary boards next meet.

This is good news if you have a mortgage.

Why? Because it means that your repayments are likely to decrease as well allowing you to reduce your current payments and hopefully keep the shortfall. But, is this the best option?

Most people live "up" to their income levels (meaning that if you earned a $100K salary your lifestyle expenses would most likely be in this vicinity while a $50K wage earner would have expenses closer to this level). So, as you have already learnt to live with higher mortgage payments you may as well continue at this level.

It may seem strange to pay more than is necessary but consider it from another angle - forced saving. Firstly, for most average size mortgages the savings will be approximately $10 - $20 per week. This amount is hardly going to change your lifestyle considerably but it will alter your mortgage length and total interest payments considerably.

For this exercise I have used the following variables; a mortgage of $300K taken out over 30years at a current rate of 7%pa.

The Blue line indicates how your mortgage will continue should you reduce your payments to the new rate. The Pink line illustrates your mortgage should you continue to pay at the same amount and the Yellow line shows your mortgage if you were to increase repayments by $10 per week (paying fortnightly).

As you can see there are considerable savings to be made if you keep up the repayments or increase them. In fact, you could save 6-8 years off your loan period and more than $140K in interest.

Makes sense to sacrifice now than enjoy a little bonus.