Re: Should I save or pay my morgage?
Fixed Mortgage
I have always presumed that before a lender offers a fixed interest rate, that they have look at the likely increases over the fixed rate period and determined a rate of interest that will ensure that they do not make a loss, and in fact make an additional profit. To me the only advantage of fixing your mortgage is that you know that you will always be able to make the repayments, even if they are higher than you would pay on a variable rate. It appears that in you case, you have the capacity to deal with in any likely increase. Therefore I am not sure that a fixed rate is any advantage to you. Also as far as I know once you go the fixed rate route, you will not be able to increase you repayments or pay off a lump sum.
Increase mortgage/save/invest
There is a line of thought that you should have savings of between 3 and 12 months of you after tax income, depending on you number of dependants (if any). With that in mind creating that nest egg and then paying off the mortgage would be my choice. Once you egg is in place, either increasing the mortgage and/or investing in higher return (and risk) investments would appear to be the logical choice. By leaving additional savings in deposit accounts you are at best matching the interest you are paying on the mortgage.